Fund review: JOHCM Japan Dividend Growth

JO Hambro Capital Management (JOHCM) has announced that it will launch a new fund to target Japan’s growing dividend culture. The JOHCM Japan Dividend Growth fund will be managed by Scott McGlashan and Ruth Nash, who are experienced Japanese equities investors.

While the existing JOHCM Japan fund - which soft-closed in Q1 last year - has a pronounced small- and mid-cap bias, the Japan Dividend Growth fund will be a large-cap product incorporating a mix of dividend growth and dividend yield.

The JOHMC Japan fund is ranked within the top decile of the IMA Japan and Lipper Offshore Equity Japan sectors since it launched in May 2004.

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MM Comment:

Japan is doing well at the moment and, beyond a rally over the past year, it looks as if it could be the start of a longer-term trend for a healthy market. A lot of this has come from foreign investment, but JOHCM believes that domestic investors will play a bigger role from now on, which will provoke an increased interest in dividends. At present, pay-out ratios in Japan fall behind the global average, but if companies want to cultivate long-term shareholders, dividends will increase.

The Japanese economy took a huge hit after the earthquake, tsunami and the subsequent Fukushima disaster in 2011, but it has most definitely rebounded. The economy has evened out, but much of the best performance has come from small-caps. Activity in small-caps can be seen as a sign of renewed confidence and optimism in Japanese individuals, so JOHCM’s decision to focus on large-cap stocks is an interesting one.

One of Japan’s major problems is its population. The domestic economy is already struggling with a consistent decline in population over the past seven years. It dropped by a record 244,000 in 2013, and this, along with a lack of consistent political leadership for the past 20 years, sets a potentially risky backdrop for a domestic economy.