The GLG Japan Core Alpha fund is a fund that we have strong conviction in.
In fact, manager Stephen Harker is one of only nine managers that were recently commended in our inaugural Outstanding Achievement Awards. These awards recognise the managers of funds that have held our research team’s coveted five-star rating for five years, an achievement that we felt couldn’t go unnoticed for any longer – five-star funds are the funds that we believe are most likely to deliver for you over the longer term. Harker says of winning the award: “The Core Alpha team would like to say a big thank you to all at Tilney Bestinvest for the award of Outstanding Achievement. This is fantastic news.”
Harker’s investment style can make for a rollercoaster of a ride. However, we believe potential growth prospects for the future are excellent. This is why we were delighted to receive some exclusive insight into the Japanese market from him and the GLG Japan team recently – read on to find out what their view on the region is.
Exclusive insight from the GLG team
“Japan is the market everyone loves to hate. Having peaked in December 1989, the Tokyo Stock Price Index (TOPIX) hit a new bear market low in 2012. In between those two dates, the country that had been an economic success story of the post-war period lost its sheen to the point of becoming considered un-investable. Even today, there are many who doubt that Japan has a future, claiming that the country is in terminal decline. We see things differently.
What happened in between those two dates is that Japan also suffered a major banking crisis. First, there were 19 major banks when the bull market peaked in 1989. Today, that number has shrunk to just 7 through a series of bankruptcies, nationalisations, rescue mergers and more rescue mergers. Even more dramatically, not a single one of those 19 banks still bears the same name as it did 25 years ago.
It would be surprising if such a severe economic illness did not leave the body weak, requiring time for recuperation. The cycle started to turn positive again in Japan – bank lending started growing again – just in time to be hit hard by the western financial crisis of 2007-2008. No sooner had it started to pick up once more after that external shock than the terrible year of 2011, complete with the natural disasters of earthquake, tsunami and Thai floods (hitting Japanese manufacturers hard), plus a man-made euro zone crisis. This all delivered a terrible blow to confidence.
Against this background, the election of Shinzo Abe in late 2012 (just a few brief months after the TOPIX bear market low in June) marked a departure. What is interesting about Mr Abe’s second coming as prime minister is how strongly and repeatedly the Japanese electorate has supported him – in lower house elections, upper house elections, Tokyo governor elections and then for a second time in lower house elections in 2014. We believe that this says more about the electorate than it does about Mr Abe. Namely, that the Japanese people had got to a point where they were ready for a man with a clear vision of where he wanted to take the country. Japan has not just been through an economic cycle driven by banking destruction; it has also been through a protracted emotional cycle from denial, anger and bargaining to depression and finally acceptance.
So, in short, we do not believe that Japan is in terminal decline, but rather that the country has been going through an economic cycle. Within this unpopular market, our approach is to invest in unpopular companies.
This approach reflects a belief in reversion to the mean. A simpler way of expressing it is this: we do not need to believe that a company whose valuation has fallen a long way has some new product that will make it number one again. We just need it to stop things getting worse and preferably start making them get better. Assuming we have bought its shares at a low enough price, that should give us a return on our investment.”
If you enjoyed this article, we also had the opportunity to sit down with GLG’s Jeff Atherton recently, and you can watch the video of our discussion here. The GLG Japan Core Alpha fund is a fund that we have conviction in and believe is likely to deliver for you over the long term. For details on the fund please visit GLG’s fund page here.
What next? You can invest here, or you can simply find out more and discuss your investments by giving us a call on 020 7189 2400, requesting a call back or emailing us at firstname.lastname@example.org.
To discover the other managers who were awarded our Outstanding Achievement Award, please click here.
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