We have added the Nomura Funds Japan Strategic Value fund to our Recommended list.

Snapshot

A well-established Japanese equity fund where the team seeks companies whose stock prices do not reflect the long-term potential.  The assessment of value is disciplined, with the team stress-testing the reasons for undervaluation and the catalysts for a re-rating.  Within its sector, the fund features in our 'Larger-Cap, Value Biased' category.

Fund Description – Key Points

• Based in Tokyo, Lead Portfolio Manager and Head of Japan Strategic Value, Yoshihiro Miyazaki, was appointed to the role in 2021 but has been involved in the management of this strategy since 2005.
• The strategy has been in existence since 2000 and therefore it has been tested through a wide variety of market conditions.
• Philosophically, the team believes that, given the inefficiencies in the market, value can be added through research-intensive, bottom-up stock selection.  The aim is to identify companies whose stock prices do not reflect the long-term potential through a holistic assessment of a company’s assets, earnings power and intangibles.
• Their disciplined process of breaking down the components of undervaluation is twinned with concern for a company’s potential and future earnings power.  This is their definition of ‘strategic value’.

Characteristics & Utility

• While the fund has a value bias, it is positioned as an ‘all-weather’ strategy as the approach is concerned not only upon current undervaluation, but also upon a company’s potential.  The aim is not only to capture a positive share price correction, but also to benefit from an increase in corporate value over time.
• The strategy is relatively unconstrained, and the managers are free to consider companies from across all sectors and market-cap size.  Through time, they have tended to identify a greater number of value opportunities amongst mid-cap stocks.  The team takes steps to ensure proper diversification and portfolio liquidity.
• The focus upon undervalued companies means that the performance of the strategy is likely to struggle during ‘bubble’ periods, when valuation factors are overtaken by sentiment, as well as during periods of extreme pessimism.
• The fund is suited to those who are seeking a relative value approach in Japanese equities.  It could be used as a mainstay exposure to the asset class in a portfolio, provided there is some tolerance for performance variability.  Within a blend, a growth-biased fund would be a suitable complement.

To view our full factsheet, please visit the fund page on our website.