To provide long-term capital growth through investing in a concentrated portfolio of Japanese stocks, with a bias towards the small and mid-cap areas of the Japanese stock market.

Please note that for capacity reasons the Fund is 'soft-closed' to new direct investors.

Although the news flow could hardly be described as positive, global markets performed well in April. It was a month of records. The consumer sentiment index posted its biggest ever fall. Machine tool orders fell by a record 41%.  And the Japanese government announced its biggest ever fiscal stimulus package, which, at ¥108 trillion, is equivalent to 20% of GDP and includes a ¥100,000 cash payment to every Japanese citizen. 

Although Japan is now under a state of emergency, the government has no authority to compel citizens to stay at home, or businesses to close. Many shops and restaurants remain open (albeit closing earlier than normal). This might sound reckless, however, since recording its first case of the virus in mid-January, Japan has suffered just 432 Covid-19-related deaths. 

To date, 120 of the biggest 500 companies in the Topix index have reported their full-year earnings. Of these, only 49 have felt able to give forecasts for the current year. More (58) have given dividend guidance, of which just six will lower dividends this year. 

The Fund outperformed its benchmark, even though the Topix Growth index outperformed Topix Value substantially in April. We continued to reduce economy-sensitive stocks in favour of technology. We lowered our weighting in Denso, the auto parts company, and recycled the proceeds into Taiyo Yuden, a manufacturer of electronic components. Later in the month, Denso announced poor numbers due to product recalls and we sold the rest of our holding. We also sold Mitsubishi Chemical, after it revised down its earnings forecasts and cut its dividend. It was replaced by Horiba, a manufacturer of semiconductor production equipment.

A few of our companies have already reported earnings. Shinetsu, a manufacturer of semiconductor silicon, produced strong numbers. Nohmi Bosai, our fire prevention equipment company, revised up its forecasts. Technopro, the engineer outsourcing company, had very solid third quarter numbers. Tokyotokeiba, our horse racing company, saw its operating profits soar by 40% in the most recent quarter. And Daibiru, the Osaka-based real estate company, forecast a modest decline in earnings for the current year, but maintained its dividend and announced its first ever share buyback.

The (admittedly limited) results announcements to date suggest that Japanese companies’ strong balance sheets, previously seen as a problem by investors, are proving to be an asset in this crisis. Price-to-book multiples are back to 50-year lows. As usual, foreign investors have reacted to a global crisis by reducing their Japanese exposure. The four most dangerous words in investment are said to be “this time is different”. But perhaps this time it is. 

JOHCM/Bloomberg/Tokyo Stock Exchange/Lipper.

Data shown net of fees, net income reinvested. Please note that all fund performance is shown against the TOPIX TR adjusted. Performance of other share classes may vary and is available on request. Where shown, monthly returns table shows compounded discrete monthly performance.

Past performance is no guarantee of future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. The Funds investment include shares in small-cap companies and these tend to be traded less frequently and in lower volumes than larger companies making them potentially less liquid and more volatile. We recommend that you read the Prospectus and Key Investor Information available from the address overleaf or from our website.