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Bulk of investors missing real Japan story, says top boutique manager

Bulk of investors missing real Japan story, says top boutique manager

There is a major misconception about the short-term impacts of Abenomics compared to longer-term trends and investors are missing the bigger picture, according to Citywire AAA-rated manager Rupert Kimber.

Speaking to Citywire Global, the London-based manager, who runs the Tiburon Taiko fund, said Abenomics will not be the saviour of the Japanese corporate sector as companies themselves are driving change.

‘The overwhelming majority of investors aren’t aware of the domestic corporate restructuring story and haven’t done the work or allocated the analytical resources to appreciate the extent of these changes.’

‘There is very little awareness about what happened at a corporate level in the 2009-2012 period and that is the real story. Abe's second coming has distracted investors from the domestic story.’

‘This was the time they really took restructuring on board and - having begun as an analyst working in Japan in 1989 - I can say this is the most interesting four year period in this market I have seen.’

His view follows recent comments by UBS Wealth Management’s global CIO, Alexander Friedman, who recommended investors short the yen.

Kimber pointed to sector positions rather than individual stock bets by way of example.

The concrete and cement industry, which he was previously invested in, has undertaken large-scale, self-driven change to improve sustainability and profitability.

‘The industry prior to 2008 had exceptionally poor capital discipline and about 25-35% overcapacity, post-2008 and the global financial crisis the leading companies were being put under pressure by the banks.’

‘The banks wanted to see better cash flow and so the leading companies removed this excess capacity, with all the other market players following suit.’

‘This led to prices rising and being held up, which improved the return profile also went up. There was no major driver from outside but a willingness to restructure their own industry.’

Abenomics impact

Kimber, who runs a concentrated approach of 25-30 stocks, said Abenomics has been positive for the market but led many generalists into large caps and blue chips rather than, what he deems, more interesting parts of the market.

‘At the beginning of the year I could have moved into a lot of new positions, but I would have been trading the beta and that is only sustainable for so long. It is a short term measure.’

‘We are alpha-driven investors, not high octane, and some people may deem that a pedestrian approach but we are happy with the performance of the fund in the year-to-date and over the longer term.’

The Tiburon Taiko B USD Hedged fund has returned 94.2% over the three years to the end of October. This compares to a rise 57.4% by the Topix TR, its Citywire benchmark, over the same period.

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