Japanese equities present one of the more attractive equity markets, supported by reasonable valuations, improving fundamentals and negative long-term sentiment. After two decades of de-leveraging, the corporate sector holds large amounts of cash and is well positioned to expand over the next decade, especially domestic orientated companies and sectors. Relative to other developed economies, Japan represents untapped fundamental potential and an attractive valuation. With a business friendly government and reflating economy, we expect an attractive environment for investor returns.
Many investors have focused on the negative macro headlines, such as the VAT-led slowdown, growing government debt or demographic challenges. It is the bottom-up change that represents upside over the medium-term for Japanese equities. The potential for improving return on equity through re-leveraging and better capital management doesn’t appear to be priced by markets. Long-term sentiment towards Japan remains negative and many large Japanese institutional investors hold a low exposure to Japanese equities, which is a further positive.
Gold Rated Japanese Equity Fund
GLG Japan CoreAlpha remains one of our most favoured Japanese equity funds, said Morningstar fund analyst Daniel Vaughan. It has been awarded a Gold Rating.
The fund is managed by an experienced team. Stephen Harker leads the team and is backed by two senior portfolio managers in Neil Edwards, with whom he has managed the UK-domiciled version of this fund since Jan 2006, and Jeffrey Atherton, who joined in 2011.
The managers use a rigorous, repeatable process that draws on their extensive knowledge of the Japanese market. They look for companies that appear to be undervalued compared with rivals and, among these, they favour quality companies that are dominant in their sectors and which feature strong management. This process has been applied consistently and has enabled the team to run a sizable pool of assets; however, we welcome their willingness to close the funds to protect the interests of existing investors.
