Japan's corporate reforms 'here to stay'


Japan’s corporate governance reforms are “here to stay” and will likely be good for investors, according to the manager of the AVI Japan Opportunity trust.

Speaking to FTAdviser, Joe Bauernfreund said he thought the reforms brought forward by Prime Minister Shinzo Abe were more than a political move and would result in higher returns for investors.

Mr Bauernfreund, whose trust relies on the corporate governance reforms to succeed in encouraging small companies to spend the funds on their balance sheets, also said he did not think the trust was “too exposed to political risk”.

He said: “Officers from the Japan Stock Exchange are keen to point out the reforms are...becoming entrenched in the corporate society.

“The evidence we see is that managers and directors of companies are taking on board the measures. Things like more independent directors — they’re not going away if there’s a political shift.”

He also said some companies had adopted higher payout ratios in an attempt to improve shareholder returns, which had been another leg of the corporate governance reforms.

Mr Bauernfreund also told FTAdviser how he navigates the traditional society of Japan as an activist investor as well as why trusts are leaning towards small companies at the moment.

The trust, which was launched last year, has returned 2.95 per cent over the past year while the AIC Japanese Smaller Companies sector has returned 9.55 per cent.

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