- Large, high-quality Japanese companies have rarely looked so attractively-valued according to the manager
- The manager’s ‘value’ style of investing combined with good stock selection and weaker sterling boosted returns over the past year
- The fund remains one of our favourite ways to access Japan’s stock market
Stephen Harker is a contrarian investor. He seeks companies that have fallen out of favour with investors but are capable of staging a turnaround. The manager has demonstrated this to be an effective way of investing over the long term, although it can lead to shorter-term periods of underperformance and past performance should not be seen as a guide to future returns.
The fund is a concentrated portfolio of the manager’s highest-conviction ideas and currently comprises 44 stocks. We like this approach as it means each investment can contribute meaningfully to returns, although this is a higher risk strategy.
Stephen Harker has a long career investing in Japanese equities and has shown an impressive ability to add value through stock selection, according to our analysis. Japanese shares currently look good value and this fund remains one of our favourite ways to gain exposure to the country. The fund retains its place on the Wealth 150+ list of our favourite funds across the major sectors.
When in a hole, keep digging and trim when you’re winning.”
Stephen Harker aims to invest in unfashionable companies when their share prices are at a low point. He assesses whether a turnaround is possible and patiently waits for their potential to be recognised by other investors. He gradually takes profits once the share price recovers, before finally selling the investment and investing in the next undervalued investment opportunity.
The manager concentrates his search at the larger end of the Japanese stock market and the type of large, high-quality companies he seeks have rarely been so lowly valued, in his view. The electric power & gas, banking and steel sectors currently offer significant value and Stephen Harker has increased exposure to these areas as a result. In contrast, he has taken profits from investments in life insurance companies, which have performed well and now offer less value.
The fund has delivered outstanding long-term performance, returning 139.6%* over Stephen Harker’s tenure since January 2006. The IA Japan sector returned 49.7%* over the same period, although this is not a guide to the future.
|Annual Percentage Growth|
| May 12 -
| May 13 -
| May 14 -
| May 15 -
| May 16 -
|Man GLG Japan CoreAlpha||37.7||1.3||32.6||-11.8||40.9|
Past performance is not a guide to the future. Source: *Lipper IM to 31/05/2017
Stephen Harker’s value-style of investing and a focus on more economically-sensitive areas of the market, such as financials, proved a headwind to performance throughout 2015 and the first half of last year. A reversal of this trend in the latter half of 2016 has proved beneficial to performance over the past year. Weaker sterling against the Japanese Yen also boosted returns for UK-based investors.
The manager’s stock selection also added value, with auto manufacturer Mitsubishi Motors and financial services group Nomura Holdings both providing solid returns. In keeping with the fund’s investment process, profits were gradually taken from these investments as their share prices rebounded.