Summary List Placement
As the Western world continues to grapple with the coronavirus crisis and its unprecedented economic fallout, Asian economies are quickly recovering and are now awash with opportunities.
With investment managers expecting a ‘tsunami’ of western cash heading to China, according to Baillie Gifford. Japanese companies are also ideally placed to benefit from Asia’s economic headstart on the West.
Shintaro Harada runs Nomura Asset Management’s Japan High Conviction Fund, which has consistently beaten its benchmark – the TOPIX Index. So far this year, the fund has returned a huge 30.86% versus the index’s mere 2.60%, ranking Harada in the 98th percentile amongst his peers.
Nomura Asset Management has seen an increase in flows over the past few months, even after former prime minister Shinzo Abe – a great reformer of Japan’s business sector – stepped down earlier this year, he said. In September-October, “the Japan high conviction fund … has had net inflows of over $100 million,” he said, adding that the money is coming “from all around the world, including Europe, Latin America and Asia.”
Abe’s deep reforms of the Japanese corporate world will continue, even under new Prime Minister Yoshihide Suga, he said, adding there will be a renewed focus on ethical, social and governance-led endeavors and the “digitization” of the economy.
“Prime Minister Suga is passionate about digital transformation in Japan. He recently announced the launch of a digital agency for the first time in Japan and essentially the IT sector will likely benefit from this digital transformation. That’ll be another big theme in the Japanese market next year,” Harada said.
One such company that has performed well recently is M3.com, a leading “digital transformation of marketing for pharmaceutical companies, enabling companies to communicate with healthcare professionals over digital channels, removing the need for in-person visits,” he said. M3 is also one of Scottish asset manager Baillie Gifford’s top picks.
The company operates m3.com, which he said was, “a useful tool for healthcare professionals, and over 90% of doctors in Japan are said to be registered to the portal site. The site provides marketing support for pharmaceutical companies, medical education, clinical development, job recruitment, clinic appointment services.”
The fund’s strategy is to ultimately invest in companies with a “high sustainable ROE,” he said. To do this, Harada first does a “quantitative screen to narrow the universe to companies that have had a high ROE over the last five years,” he said, adding that he then via qualitative research, they “identify companies that can sustain that higher ROE over the following five years or even longer.”
This is a very long-term investment horizon compared to some of his peers, he said. This means being able to look at different industries and companies from a long-term perspective over 5-10 years, rather than short term cycles, he added.
“The difference to other growth managers is that I’m not caught up on investing in momentum plays. So obviously a lot of growth managers are looking at more short-term earnings growth and factors of momentum which dictates their portfolio,” …read more
Source:: Business Insider