‘Japanese banks have been harshly treated’

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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