Investments  

Trust launches with focus on Japanese equities

Trust launches with focus on Japanese equities

An investment trust aiming to achieve returns from investments in Japanese shares will soon launch on the London Stock Exchange.

The trust, to be named AVI Japan Opportunity Trust plc, will be run by Asset Value Investors. The best known fund run by that company is the British Empire investment trust. The manager of that vehicle, Joe Bauernfreund, will run the new trust.

The trust will charge one per cent annually, of either the net asset value or the market cap, whichever is lower.

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According to latest data from the Investment Association for the month of August, the IA Japan sector was the only developed market region to have net inflows.

Mr Bauernfreund said: "Over the last year, the team has identified and researched a variety of companies across a number of sectors in Japan that are trading at wide discounts to net asset value, with an average net cash and investment securities balance covering more than 70 per cent of their market caps.

"This is an exciting opportunity for investors to gain exposure to high quality companies with growing operating businesses. We have identified a gap in the market at the ‘value end’ of the small to medium sized Japanese company sectors, and the new trust will seek to capitalise on this opportunity.

"Critically, there has been a shift in Japanese corporate governance in recent years which has fostered rising support for more shareholder activism, a trend in which we have actively participated in an attempt to unlock long-trapped value."

Mr Bauernfreund said AVI will take an activist approach to its investments, encouraging management and boards of investee companies to improve corporate governance and reduce excess capital through distributions to shareholders.

"Such distributions may include special dividends, share buy backs and tender offers," he said.

David Scott, an adviser at Andrews Gwynne in Leeds, said he believes developed market equities are "on the downturn" and he has reduced his clients' exposure to the assets accordingly.

david.thorpe@ft.com