‘Ja­pa­nese banks have been harshly treated’

The Daily Telegraph - Your Money - - INVESTING -

Last year was a dif­fi­cult time for Man GLG Ja­pan Core Al­pha. After a long pe­riod of ex­cel­lent per­for­mance that had re­warded in­vestors hand­somely, the £2.4bn fund was one of the worst per­form­ers in its sec­tor in 2017.

The fund, man­aged by Neil Ed­wards, Stephen Harker and Jeff Ather­ton, is in our Tele­graph 25 list of top port­fo­lios (tele­graph.co.uk/ go/25funds) and over the past 10 years has achieved the third-best per­for­mance in its sec­tor, mak­ing 210.7pc.

Mr Ather­ton tells Tele­graph Money why he is un­con­cerned by the poor 12 months and why he re­mains op­ti­mistic about “value” sec­tors in­clud­ing car­mak­ers and banks.

Who is the fund for?

Man GLG Ja­pan Core Al­pha is for pretty much any­one who wants to in­vest in the Ja­pa­nese stock mar­ket. We have a broad range of clients from in­di­vid­ual in­vestors on fund shops to big banks and in­sti­tu­tions.

What makes you dif­fer­ent?

We have been do­ing this for a long time and there are two defin­ing things that make us stand out.

The first is our fo­cus on pick­ing stocks that are cheap rel­a­tive to their own his­tory.

The se­cond is con­trar­i­an­ism. This means we do not buy any stock un­less it has un­der­per­formed the mar­ket for a sig­nif­i­cant pe­riod of time.

How strong is the Ja­pa­nese econ­omy?

We have a pretty good econ­omy in Ja­pan now, in terms of both em­ploy­ment and growth. Even cor­po­rate prof­its are high.

We have also had a strong cy­cle where com­pa­nies have done some self-im­prove­ment.

How­ever, that said, while firms have made some easy changes they re­main con­ser­va­tive – we haven’t seen any re­ally rad­i­cal re­forms.

CV: Jeff Ather­ton

Mr Ather­ton has sa a BA in eco­nom­ics s from the Uni­ver­sity of Sh­effield. He started his ca­reer er at Sun Life of Canada in 1987 and has man­aged Ja­pa­nese funds

How much of this is down to prime min­is­ter Shinzō Abe and his ef­forts to es­cape Ja­pan’s de­fla­tion­ary trap?

Over­all we are scep­ti­cal. Im­prove­ment in the cor­po­rate sec­tor started in 1999 – not with Abe – and it prob­a­bly goes back to the cri­sis when com­pa­nies had to gen­er­ate their own cash and re­turns be­cause banks would not lend.

Man GLG’s Jeff Ather­ton tells Jonathan Jones why he is un­con­cerned by a dis­ap­point­ing pe­riod in 2017

Last year you were near the bot­tom of your sec­tor. What hap­pened?

We don’t think we did any­thing wrong – we ac­tu­ally per­formed in line with a bench­mark that we look at in­ter­nally. We be­lieve it was a short-term con­se­quence of our in­vest­ment style. Last year was just a re­ally bad time for value in­vest­ing. The first half of 2018 was the same but we have had a good re­cov­ery since June.

What have been your best and worst stocks?

The best has been Mit­subishi UFJ, a bank: it’s been a pleas­ing ex­am­ple of the con­trar­ian, value process. The stock has been in the port­fo­lio since in­cep­tion. The worst has been No­mura, Ja­pan’s largest bro­ker. It hasn’t per­formed well and has had to make sig­nif­i­cant write-offs.

Do you own any banks?

Ja­pa­nese J banks have been harshly treated by in­vestors. They do not suf­fer from the same bad debts and credit costs as Eu­ro­pean banks.

The vast bulk of our ex­po­sure is in three mega­banks, which are very di­ver­si­fied. They are clas­sic value stocks and we are happy to hold them.


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