Japanese Equity Fund

Risk Considerations

The Fund is actively managed and invests mainly in a widely diversified portfolio of shares of companies in Japan.
Investment in the Fund involves risks, including general investment risk, equity market risk, risks associated with depositary receipts, geographic concentration risk, small and mid-capitalisation shares risk, exclusion criteria risk, currency risk and hedging risk which may result in loss of a part or the entire amount of your investment.
The Fund may use derivatives for hedging and efficient portfolio management and is subject to derivatives risk. Exposure to derivatives may lead to a risk of significant loss by the Fund.
The value of the Fund can be volatile and could go down substantially.
Investors should not invest in the Fund solely based on this website.

Investment involves risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Strategy

Fund Summary

Actively managed and invests mainly in a widely diversified portfolio of shares of companies in Japan.

Risks

The following risks are materially relevant to the fund. Please click here to view the definitions of the risks listed below.

Currency
Equities
ESG
Geographic concentration
Investment fund
Management
Market
Liquidity
Operational
Small/mid cap
Style

Typical Investor

Investors who plan to invest for the medium to long term, and who:

• are interested in investment growth
• are looking to diversify their equity investments
• understand and can accept the risks of the fund, including the risks of investing in the equities of smaller companies

30-Sep-2022 - Archibald Ciganer, Investment Analyst,

We decided to close our position in Recruit Holdings, a leading human resources services company and major global player in temporary staffing. The business has exposure to the U.S. market through Indeed, and our conviction has lessened somewhat on concerns surrounding the risks to the U.S. jobs market.
We exited our holding in KDDI, a leading mobile carrier, after its strong share price performance this year. The stock has outperformed many of its peers over the year, but we believe the fundamentals look weaker relative to Nippon Telegraph and Telephone (NTT), which we hold. NTT is a high-quality telecommunications company with a solid balance sheet. It offers defensive earnings from dominant market share in Japan in both fixed-line and mobile amid rising macroeconomic uncertainty.
In contrast, we added to our holding in Visional, which we regard as one of the most attractive companies in the services sector currently. It operates BizReach, a digital platform matching professional job seekers with employers and recruiters. We expect the recruitment platform's growth to reaccelerate as Japan's economy normalizes.
Seven & I is a leading retail conglomerate. We believe the company's acquisition of U.S. convenience store chain Speedway solidifies its subsidiary 7-Eleven's leadership in the North American market and will transform the group by (1) sharply increasing the proportion of earnings from a high-return operation with real growth potential, (2) raising return on equity via leverage, and (3) incentivizing reform in Japan of underperforming assets.
We trimmed our position in leading drugstore chain MatsukiyoCocokara and discount retailer Pan Pacific International after the strong run in their share prices. Optimism about the reopening of the economy boosted both companies.
We added a position in Olympus, a Japanese medical technology company and leader of gastrointestinal endoscopes with significant global market share. We believe Olympus can deliver higher-than-consensus earnings as the market underappreciates its potential of core endoscope business sustainability and health care portfolio rationalization.
Shimadzu is a life science tool company. In our view, it is a long-term growth compounder with strong tailwinds from increased demands of health care spending and drug production in Asia. We took advantage of recent weakness in its share price to add to our holding.
In contrast, we sold out of our position in Tokyo Electron, a leading semiconductor company. We prefer to own this stock when we believe we have reached the bottom of the semiconductor cycle.
We initiated a position in East Japan Railway, which operates conventional and bullet train services as well as retail businesses in the Tokyo and northern Japan areas. We believe profits can recover from post-Covid normalization and increasing domestic and international travel.

30-Sep-2022 - Archibald Ciganer, Investment Analyst,

Hikari Tsushin, an office automation and telecommunications business, was a key contributor. The company reported a strong earnings update in August and announced that it had fully hedged electricity price volatility and would be launching a new gas business; the stock price soared as a result.
Shares of Solasto, a leading player in the staffing and operational outsourcing market for medical institutions, rallied. It reported a yearly jump in the number of residents at its elderly care facilities, as well as a gain in its day-service users, in June.
Visional operates BizReach, a digital platform matching professional job seekers with employers and recruiters. Its shares rose after it delivered strong results and guidance, even after post-COVID compensations normalized. It has been direct recruiting rather than fees from recruiters that has been driving growth.
Shares of leading drugstore chain MatsukiyoCocokara and an operator of discount stores, Pan Pacific International, rose as the further easing of border controls and an expected recovery in domestic traffic boosted sentiment for both stocks. Both companies also reported positive first-quarter earnings results in August.
Casual clothing retailer Fast Retailing, which owns the UNIQLO brand, performed strongly. The company delivered a set of results that were well above consensus expectations and raised guidance by more than expected. Despite the impact of lockdowns in China, operating profits hit a record quarterly high for the third straight quarter.
Eisai was one of the top contributors within the overall portfolio. Shares of the company gained toward the end of September after it announced the successful phase three trial of its Alzheimer's drug, Lecanemab.
Shares of Daiichi Sankyo, a pharmaceutical company with global operations focused on oncology, gained following positive news surrounding the Food and Drug Administration's approval of its breast cancer treatment, Enhertu.
At the start of the review period, we had one position in foods, Ezaki Glico, one of Japan's largest listed confectionery manufacturers. It faced headwinds of China's lockdown and soaring prices of raw materials. We sold our position given management's seeming unwillingness to embrace reforms necessary to raise margins or to reduce exposure to structurally difficult categories such as dairy.
Shares of Kansai Paint rose over the review period. The company's latest earnings results demonstrated its ability to pass on higher costs in Japan and Europe.
Daio Paper lost ground and was a major detractor over the quarter. Earnings at the leading paper manufacturer continued to be hurt by rising commodity prices, in particular oil and coal. However, we expect operating profits to improve as input price pressures ease.

Disclosure on Vendor Indices can be found here.