Dalton Strategic Partnership’s Akira Yoshimi has said one of the biggest changes in his two decades of running his Advantage strategy is the increased influence on the Japanese market by overseas investors.
Mr Yoshimi, who has managed Dalton’s Melchior Japan Advantage fund since its launch in 2007, began the Advantage strategy in 1994 and has outperformed the Topix index in 18 of the 20 calendar years.
The manager said while the Lehman crisis was the “biggest one-off event” of his career, the growing influence foreign investors are having on Japan’s market was also a burgeoning trend.
“The increased impact of foreign investors on the Japanese equity market is also a major development,” Mr Yoshimi said.
“A total of 60 per cent of daily trading volume in Japan is generated by foreign investors.”
Mr Yoshimi added that in 2014, external factors would be a key factor in the market’s performance.
“The development of external risk factors, for example the Ukraine crisis, will also be a factor, and will have an impact on the strength of the yen,” he said.
“The risk sentiment of European investors will be key. European investors were among the largest buyers of Japanese equities last year, and a reduction of risk appetite could cause selling pressure in the asset class.”
Mr Yoshimi said while it did not appear his fund had major sector bets, there were bigger differences when his holdings were looked at on a more microscopic level.
“At a sub-sector level there are some larger bets in place,” he said.
“For example the portfolio is overweight banks by 0.5 per cent, but our overweight to the three largest mega-banks is 3.7 per cent.
“We prefer the larger banks because domestic banking (to which smaller regional banks tend to be exposed) is still struggling, whereas the more internationally diversified banking franchises of the mega-banks are showing greater earnings growth potential.”
Mr Yoshimi said the fund seldom took large sector bets but that his weightings above or below the benchmark were “at the lower end of conviction”.
Mr Yoshimi said his strategy mantra was ‘don’t fight the market, work with the market’ and he combines this with a focus on low price/earning ratio value investing.
Magnus Spence, Dalton chief executive, said Mr Yoshimi had been nicknamed the ‘Bonsai Manager’, “because like the famed bonsai masters of ancient Japan, he is meticulous and relentless in his attempts to craft the perfect portfolio”.
Yoshimi ‘proud of his performance’
Japanese fund manager Akira Yoshimi has been running his Advantage strategy for 20 years and has been managing Japanese equities since 1987, when he joined Daiwa International Capital Management.
The manager says he is proud of his performance given the Advantage strategy, which he uses to run Dalton’s Melchior Japan Advantage fund, has outperformed the Japanese market in 18 out of 20 years.
However, the manager acknowledges his “biggest mistake or disappointment” was underperforming the market in 2011 and 2012.
“The violent sector rotations over this period, primarily caused by external shocks such as the European sovereign debt crises, were particularly difficult for my approach,” he said.
