Four Seasons Asia Investment (Four Seasons) is to launch a new flagship long-only Japan UCITS fund in September 2018. The intention is to open up a strategy which was previously only available to institutional investors to a broader range of accredited investors.
Four Seasons was created in 2006 by CEO Shigeka Koda and Managing Director Kahori Ando, who both also act as Co-Chief Investment Officers, and have more than 50 years of investment experience in the space between them. Shigeka Koda spent 14 years at Goldman Sachs prior to founding Four Seasons, where he was Japanese Equity Senior Portfolio Manager. Kahori Ando spent 12 years at Sparx Asset Management before joining Four Seasons, latterly as Japanese Equity Senior Portfolio Manager. The firm is based in Singapore.
Koda says: “Global financial markets have been looking for a source of alpha since the end of the central banks’ ultra-easy monetary policy. Japanese equities are the third largest globally in terms of market cap, but the sector has been neglected by international investors for three decades. With deflation now leaving the system, demographic, technological and regulatory changes are combining to kick-start the Japanese economy.
“In particular, labour shortages and rising demand for labour will result in productivity improvements, rising wages, better management practices and increasing economic growth which will benefit Japanese equity markets and create significant opportunities to generate alpha. We focus on capturing change as a source of return, and the major changes underway in Japan are creating similar opportunities in Japanese equities as existed in US equities in the 1980s.”
Four Seasons utilises its on-the-ground knowledge of the Japanese market to stock-pick only compelling companies that offer the most attractive returns – often those which do not appear on conventional benchmarks. As a consequence, the strategy has low correlations with the market and with peers. It does not focus on benchmarks, instead seeking the most attractive risk/return profile for its investors by maximising upside potential and minimising downside risk. The strategy is also diversified by varied investment horizons so that different type of changes, or catalysts are incorporated inside of the portfolio.
Koda adds: “We take a bottom-up approach and look at companies in less crowded markets, often mid-small cap ones. These are often firms which are under-researched and are more impacted by rapid change. Our philosophy is to capture the impact of this change at a discount. But although we have a mid-small cap bias, this is not a small cap strategy, we will trade larger firms when there is merit in doing so. We are patient investors who scrutinise stocks from a short-term, mid-term and strategic perspective and simultaneously employ sophisticated risk management to protect against potential downside risk.”
Koda says: “After three decades of stagnation, it is understandable that Japanese equities are underweight in many international investor portfolios. But profound changes are now underway in the Japanese economy and in the Japanese society, this translates to the awakening of the sleeping giant. We believe that this is a ‘Godzilla’ moment for Japan when all these mega-trends combine to create massive changes and major opportunities for experienced Japan investors.”
