17.04.2024
Diversification is crucial, especially in 2024
As 2023’s concentrated market rally is extending into 2024, equity investors are worried about a potential consolidation or pullback.
Japan: land of rising opportunities
Navigate Japan's dynamic equity landscape with UBP's expert guidance and innovative strategies.
Japan's equity market has emerged from the shadows as a beacon of opportunity. Though often overlooked in recent years, Japanese stocks have quietly outperformed their developed market peers. This is no coincidence – history shows that Japanese equities exhibit high beta during global economic recoveries, amplifying gains. Moreover, the earnings of Japanese companies are highly sensitive to domestic GDP growth, more so than their counterparts in other developed nations. As the global economy finds its footing in the coming years, this positions Japanese stocks for potentially significant upside surprises.
The benefits of investing in Japanese equities
Seeking opportunities in a resurgent market?
Japan's equity market provides investors with several compelling advantages.
Japanese equities have historically exhibited a low correlation to other developed markets, providing portfolio diversification and potentially reducing overall volatility.
Japan is home to world-class companies across various sectors, from cutting-edge technology and robotics to consumer brands and healthcare. These firms are well-positioned to benefit from global growth trends and domestic economic reforms.
The Japanese government has actively promoted corporate governance reforms, encouraging companies to increase transparency, return on equity, and shareholder returns. As they take hold, these initiatives could drive further earnings growth and equity market performance.
As Japan's economy continues its post-pandemic recovery, corporate earnings are expected to rebound strongly. Analysts are revising earnings forecasts upwards, underpinned by improving domestic demand and a more favorable global trade environment.
Navigating Japan’s equity landscape with precision and discipline
Our approach to Japanese equities is rooted in rigorous fundamental research and a long-term perspective.
- We conduct an in-depth analysis of each company's business model, competitive advantages, and growth prospects, engaging directly with management to gain strategic insights.
- ESG considerations are systematically integrated into our process to identify businesses with long-term value-creation potential.
- As active owners, we engage constructively with companies to encourage best practices in governance, capital allocation, and sustainability, aligning with our clients' interests.
- Robust risk management, including careful monitoring of exposures and diversification, is integral to our approach. We aim to deliver strong risk-adjusted returns over the long term.
Ready to explore the potential of Japanese equities?
Please speak to our investment specialists to learn how we can help you seize opportunities in this dynamic market.
Unlocking Japan’s potential through active management
Active management is vital to capitalising on the vast opportunities offered by the Japanese equity market. Our strategies, crafted by seasoned investment teams, are designed to uncover hidden gems and deliver consistent returns over the long term.
The Angel Japan Small Cap Equity strategy focuses on innovative smaller companies with solid management, niche products, and sound growth prospects. By identifying these future leaders, we aim to capture the dynamism and potential of Japan's vibrant small-cap universe.
Our Japan Equity Responsible strategy takes a value-oriented approach, investing in a concentrated portfolio of undervalued stocks based on their mid- to long-term normalised profit. Guided by a proprietary ESG screening methodology, we seek to capture compelling opportunities arising from cyclical and one-off catalysts.
Across our strategies, we combine rigorous fundamental analysis with a keen understanding of the Japanese market's unique dynamics. We strive to uncover the most promising investment opportunities through active engagement and a long-term perspective while carefully managing risk.
Our strategies
Our strategies are designed to capitalise on opportunities across the Japanese equity landscape. By leveraging our sector expertise, rigorous analysis, and active risk management, we aim to deliver superior risk-adjusted returns throughout market cycles.
In Japan, we believe that companies with strong or improving governance are more likely to achieve best-in-class standards in social and environmental areas. By integrating ESG analysis and active engagement into our investment approach, we aim to identify the companies best positioned for sustainable long-term growth.
Investor insights
Frequently asked questions about Japanese equities
Japan's economic cycles of expansion and contraction can significantly influence stock prices. Investors should monitor critical indicators such as GDP growth, unemployment, and inflation to gauge the economy's health and potential impact on their equity investments.
Japan boasts a diverse economy with strengths in the automotive, electronics, and manufacturing sectors. However, the most attractive sectors for investment can vary depending on prevailing economic conditions and structural trends. Investors should stay attuned to these dynamics to identify the most promising opportunities.
Fluctuations in the exchange rate between the yen and an investor's home currency can significantly impact investment returns. If the yen appreciates, returns can increase when converted back to the home currency, while yen depreciation can erode returns. Investors should consider their currency exposure and potential hedging strategies.
Investing in Japanese equities involves market risk, where overall market declines can impact portfolio value. Currency risk, stemming from yen fluctuations, can also affect returns for international investors. Additionally, company- or sector-specific risks can arise from underperforming individual firms or industries. Diversification and risk management are essential.
Meet the team
UBP's Japanese Equity franchise, managed jointly by the Angel team and our partner Sompo Asset Management since 2013, combines deep market knowledge with a disciplined investment approach. Our experienced Tokyo and Hong Kong-based professionals are dedicated to uncovering the most compelling opportunities in this dynamic market.
Your contact
Cedric Le Berre, Senior Investment Specialist
Key facts and figures
- Over USD 1 billion in Japanese equity assets under management
- Portfolio managers double as analysts, actively involved across all strategies
- 20+ years of average team experience with low turnover
- Proven track record of active, fundamental investing since 2001
