Man GLG Japan CoreAlpha - opportunity knocks

Jonathon Curtis | Fri 20 July 2018

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• Stephen Harker sees huge opportunity in unloved Japanese shares
• He’s investing in big Japanese companies at very low prices
• The fund has lagged the Japanese market over the past year, but long-term performance is good

Our View

Stephen Harker can’t believe what he’s seeing. He’s rarely known large Japanese companies to be so unloved by investors, and he’s invested in Japan since 1984. That suits him just fine though.

Harker, manager of Man GLG Japan CoreAlpha, is a ‘value investor’. He looks for companies that are going through a rough patch. Their recent performance might be poor, or they might’ve fallen out of favour with investors. Whatever the reason, if Harker thinks a company will bounce back, he'll invest. He hopes he’ll be able to buy their shares at a low price and sell once he's made a profit.

Our research shows Harker’s stock-picking skills are excellent. He has a lot of faith in his investment process and the companies he invests in. He invests in relatively few companies, so each one can have a big impact on the fund’s performance, though it can increase risk.

Harker has a long and successful track record investing in Japanese shares, and we like his investment approach. That’s why we back the fund and it’s part of the Wealth 150+ list of our favourite funds. As ever though, past performance isn’t a guide to future returns.

Manger's outlook

The Japanese stock market excites Harker. There are currently lots of large and unloved Japanese companies whose shares can be bought cheaply, but have the potential to perform well in future. Harker thinks the share prices of some Japanese titans, such as Toyota and Mitsubishi UFJ, are extraordinarily low. Japan Post, a huge logistics and financial services company, is cheaper than any large company he’s ever seen.

And the lower the share prices go, the more he’s investing.

Harker doesn’t feel this will last forever though. For the fund to benefit he needs the share prices to rise again. By investing in the companies in the first place, he believes they’ll return to favour among investors eventually. This can take months or even years. Harker’s a patient investor – he’ll hold companies for as long as it takes for their share prices to rise.

How has the fund performed?

The fund has done very well over the long term. In the past 10 years it’s grown 184.9% versus 123.9%* for the FTSE Japan index. Our analysis suggests this is largely down to Harker’s ability to pick shares that rise over time, regardless of what industry they're in. Although please remember, past performance is not a guide to the future.

The fund’s fallen behind the overall Japanese stock market over the past year. Many investors preferred companies they think offer more growth potential, rather than those that’ve fallen on hard times and could subsequently do well.

It’s normal for some investment styles to do better than others at times. That’s why managers always have times when they don’t perform quite as well. Harker’s no different. But we have confidence he’ll deliver in the long run, though there are no guarantees. We think this fund is one of the best ways of investing in Japan.

Past performance is not a guide to the future. Source: Lipper IM to 30/06/2018.

Past performance is not a guide to the future. Source: *Lipper IM to 30/06/2018.

Please read the Key Features/ Key Investor Information in addition to the information above.

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