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GAM Star Japan Leaders

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GAM Star Japan Leaders seeks sustainable, long-term capital appreciation by actively investing in a concentrated portfolio of leading Japanese companies. Managers Ernst Glanzmann, Goro Takahashi and Lukas Knueppel use a high-conviction approach to identify quality companies that are inexpensively valued at the time of purchase and that they believe will deliver attractive returns over the long term.

Active Thinking Video

Goro Takahashi describes the key factors that influenced the Japanese market over the third quarter, particularly the main stock exchange’s ongoing initiative to improve listed companies’ financial indicators, and the areas he thinks investors should focus on into the turn of the year.

The main drivers from here will be inflation and wages. The wage negotiation, or "shunto", early next year will be the key in this regard.

Our Edge

Highly experienced team

The specialist investment team has over 20 years’ experience investing in Japanese equities.

Outstanding track record

Outperformance of the benchmark in 11 of 12 years since the strategy’s launch. The fund delivered 18.7% of alpha to investors in 20201.

1 JPY Institutional share class, net of fees.

Disciplined process

The team focuses only on businesses which they believe have superior long-term growth potential and show a high return on equity and low leverage. Such stocks are selected only at a significant discount to calculated fair value.

Equal weighting approach

The concentrated portfolio is equally weighted by NAV and rebalanced on an annual basis to ensure diversification across business models and mitigate single position risk.

Long-term horizon

The team’s investment horizon is typically more than five years, in a bid to maximise returns by investing in companies believed capable of achieving long-term, superior, sustainable growth.

Investment Team

GAM Star Japan Leaders is managed by Ernst Glanzmann, Goro Takahashi and portfolio manager Lukas Knüppel. The team has built an outstanding track record of strong returns versus the benchmark and has over 20 years’ experience analysing and investing in Japanese equities.

The managers have in-depth knowledge of the Japanese corporate sector, equity market and economy. This is based on many years of continuous analysis, supported by company visits and meetings with senior management.

The team is responsible for research, stock selection, portfolio construction, and risk management. However, an additional risk oversight function is performed independently by GAM’s risk teams.

We believe that a small number of leading firms deliver superior portfolio returns over a longer holding period, if purchased for good value
Ernst Glanzmann, Investment Director.
Ernst Glanzmann
Investment Director
Goro Takahashi
Investment Director
Lukas Knüppel
Co-Manager and Investment Director

Philosophy and Process

Investment Philosophy

The team believes that a small number of leading companies deliver superior portfolio returns over the long term, if purchased for ‘good value’. For this buy-and-hold strategy, the team applies key success factors including stringent selection based on financial criteria; deep analysis of a business model’s risks and benefits (including pricing power and financial strength); buying quality stocks when investors doubt their prospects; and practicing patience (holding quality stocks providing no valid reason exists to sell). Through this approach, the team believes it is possible to participate in the value creation process of superior business models and deliver attractive returns for investors.

Investment Process

The team uses a disciplined, bottom-up process, with an ESG framework integrated throughout. The process starts with a strict quantitative screening of the TOPIX universe. Using four financial filters (growth rate, profitability, capital intensity and balance sheet structure), around 100 successful businesses are identified. In-depth, fundamental company analysis is conducted, focusing on pricing power and financial strength, to understand the past success of these businesses. If the business model is sustainable, the team applies fair value analysis, using their own estimates. An investment is made when a company’s price offers a minimum of 30% discount versus its calculated fair value. The concentrated portfolio of 20-30 large and mid-cap stocks is diversified across business models and rebalanced annually to equal weights.

1

Screening

  • Sales/profit growth, capital intensity, profitability and balance sheet structure
  • 2,000 stocks reduced to approximately 100
2

Fundamental analysis

  • Understand past success of superior businesses
  • Focus on pricing power and financial strength
3

Fair value analysis

  • Appraise value and invest if ≥30% discount
  • Stocks followed until required discount is reached
4

Portfolio construction and maintenance

  • 20-30 equally weighted positions
  • Disciplined, case-by-case approach to closing positions

Reasons to Invest

Stable, Japanese growth

Japanese equities are often overlooked by those who conflate investing in Japanese firms with investing purely in the domestic economy. The latter faces demographic challenges; the former offers underappreciated prospects for stable growth.

Improved corporate governance

Japan offers investors political stability and strong corporate governance. Recent structural reforms are starting to take effect and we believe the operating environment for Japanese companies will continue to improve.

Emerging and developed market access

Japanese companies have historically been strong exporters, allowing investors to gain access to both developed and emerging markets worldwide.

Solid investments

Japanese companies combine high-quality business models and strong competitive positions. Many firms are global leaders in monetising their world-renowned focus on innovation through research and development.

Potential for attractive returns

A concentrated portfolio of Japanese equities allows investors to access world-leading companies from a relatively unloved sector of the universe, available at an attractive valuation.

Key Risks

Currency Risk – Non-base currency share class

Non-base currency share classes may or may not be hedged to the base currency of the Fund. Changes in exchange rates will have an impact on the value of shares in the Fund which are not denominated in the base currency. Where hedging strategies are employed, they may not be fully effective.

Concentration Risk


Concentration in a limited number of securities and industry sectors may result in more volatility than investing in broadly diversified Funds.

Single Country Risk


Investment in companies of a single country may be subject to greater political, social, economic and tax risks and may be more volatile than investments in more broadly diversified funds. Local tax law may change retrospectively and without notice.

Equity

Investments in equities (directly or indirectly via derivatives) may be subject to significant fluctuations in value.

Capital at risk

All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Our Thinking

Active Thinking
Active Thinking: Japanese equities shining brighter
4 December 2023

Goro Takahashi and Lukas Knüppel, Investment Directors, Japan Equities, explore how various global and domestic factors have contributed to an optimistic outlook for the Japanese equity market.

Outlook 2024
Outlook 2024: Lukas Knüppel (Japan Equities)
December 2023

Japanese equities – Unique investment opportunities are emerging in Japan in quality companies at reasonable prices

Our Thinking

Fund Information

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Contacts

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GAM Star Japan Leaders is a sub-fund of GAM Star Fund p.l.c., registered office at Dockline, Mayor Street, IFSC, Dublin, D01 K8N7, Ireland, an umbrella investment company

Disclaimer: Past performance is not an indicator of future performance and current or future trends. The indications could be based on figures denominated in a currency that may be different from the currency of your residence country and therefore the return may increase or decrease as a result of currency fluctuations. Capital at risk: all financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed. Any reference to a security is not a recommendation to buy or sell that security.

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