AVI is offering a new Japanese Special Situations Fund, an open-ended investment of the existing closed-end AVI Japan Opportunity Trust launched in 2018.
The fund will have a specialist focus on Japan Small-Cap equities, investing in 25-35 companies.
AVI said the fund will utilise AVI’s bottom-up, research-driven approach and experience to constructively engage with companies to unlock hidden value and drive shareholder returns. It will be managed by AVI’s CEO & CIO, Joe Bauernfreund, supported by AVI’s six-strong Japan-dedicated research team.
Bauernfreund said: “As well as a 40-year track record in global equities, we have a five-year track record of demonstrable success as an active and engaged investor in Japan through the AVI Japan Opportunity Trust, and have seen significant demand for a UCITS version.”
Bauernfreund says he sees exciting investment opportunities in Japan. “By the end of 2018 it was evident that the newly introduced Corporate Governance Code was having a marked impact on the behaviour of companies and shareholders in Japan. Attitudes towards balance sheet efficiency, operating performance, and shareholder returns were shifting. We began to see an increase in the quantum and success of shareholder activism.
“The pressure and mindset shift has only continued over the past five years. Most recently the TSE required companies to put forward plans to improve capital efficiency, especially if trading on a price-to-book ratio of less than 1x. The regulators are aligned with a common goal in improving corporate value, aiding our engagement, and accelerating change”.
“Further, for Sterling-based investors the Yen has been a significant headwind over the last 10 years. Japan’s central bank abandoning its yield curve control will enhance the returns on offer on the country’s debt, leading some investors to forecast that a ‘great repatriation’ of Japanese investment flows is set to accelerate.
“We are optimistic about the macro environment in Japan. The weak Yen makes Japan highly cost-competitive, both for tourism and manufacturing. Inflation has returned after a 40-year absence and, with wage growth and increased spending, we could see a more rational allocation of capital and improved productivity, which would bode well for our portfolio companies.”
The new fund will have a Dublin UCITs structure and will be benchmarked against the MSCI Japan Small Cap Index. The annual management fee is 1%.
