The team then conducts valuation analysis on the watchlist constituents. The entire portfolio is reviewed annually. The managers avoid the use of set price targets and recognise the limitations of models and valuation methodologies. However, this exercise helps encourage discussion and helps them to understand the key upside and downside risks for a stock.
The result is a high conviction fund - currently holding less than 40 stocks – which invests predominantly in large and medium-sized Japanese companies, with a quality focus. Human resources company Recruit Holdings (4.8 per cent) is currently the largest holding, with Keyence Corporation and Tokyo Electron (4.6 and 4.5 per cent respectively) completing the top three.
At 0.83 per cent, the ongoing charge for the fund is also reasonable for the region it invests in.
We like true active management – and they do not come more active than this. Performance has been exceptional since launch in October 2015 and we believe this fund should be considered as a core option for those looking to invest in Japan.
Darius McDermott is managing director of FundCalibre