e-fundresearch: Mr Hidekazu Kishimoto, you are the fund manager of LOF Alpha Japan fund (ISIN: LU0372982552). Since when are your responsible for the fund management?
Kishimoto: As the name of the fund indicates, it has been created by Alpha Japan Asset Advisors and Lombard-Odier, with whom we have a partnership. So together with my team we have been looking after this fund since its inception in July 2008.
e-fundresearch: Which benchmark do you adhere to?
Kishimoto: Topix Total Return.
e-fundresearch: Are you also responsible for other funds at the moment?
Kishimoto: Alpha Japan is currently responsible for a total of 5 investment vehicles.
e-fundresearch: What is the total volume that you manage in all your funds?
Kishimoto: About USD 400m.
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2006-2010?
Kishimoto: Absolutely and relatively to the relevant benchmark:
e-fundresearch: How content are you with your own performance in the last years and this year?
Kishimoto: We believe that the fund has been performing well since its inception despite launching in one of the most difficult periods for equity markets (July 2008, just before Lehman Brothers’ collapse). This is especially satisfying as our strategy is based on companies’ fundamentals, something that is not necessary the investors’ main concern in period of markets’ dislocation. The fund certainly did much better than its benchmark and because it has been ranked top decile by Lipper, it has also probably done better than most of its peers during this period. Since the start of 2011, the Japanese market has been supported by attractive corporate valuation but also impeded by global factors such as civil unrests spreading in the Middle East. Nevertheless, the fund has returned a gain of about 8% this year, as of mid-February.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Kishimoto: Our goal is always to outperform the benchmark and therefore to provide added value compared to more passive or index-related investments such as ETFs. We believe that our investment approach, which is based on fundamental stock picking, is the most suitable for the Japanese equity market. Despite the sometime frustrating performance of the equity indices over the years, Japan has an impressive number of quality companies, most of them world leaders in their respective fields. And this is how we aim to invest, by cherry-picking companies we like rather than replicate an equity index. The extensive experience of the team, combined with our local presence and our proprietary valuation model allow us to select the best managed and most promising companies in order to create a concentrated portfolio which contain our best convictions at any given time.
e-fundresearch: How long have you been a fund manager already?
Kishimoto: I personally have been in the fund management industry for 40 years and today, I am lucky to be surrounded by people who each have a minimum of 20 years of experience of their own.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Kishimoto: In my opinion, the biggest success for a fund manager is consistency over the years. In that sense, I am proud to have been able to generate outperformance for my investors in pretty much every year, and for all the various funds I have been in charge. My main disappointment probably lies with the fact that most investors have been underweighted Japan as a market in the past few years, and have not always recognised the strength and quality of some of the Japanese companies.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Kishimoto: As mentioned earlier, fundamentals for Japanese companies are very attractive. Valuations are cheap by almost every measure with the average Price/Book Ratio close to parity for example. At the same time, and as opposed to their international peers, Japanese companies have not been suffering from a credit crisis since they are actually holding unprecedented levels of cash surplus (an equivalent of USD 240Bn). However, the global situation has become more unstable, with the propagation of uncertainty in the Middle Eastern countries leading to a spike in oil price for example, which raises further question marks for the global economy. We cope with this environment by being particularly active in managing our portfolio as the speed of investors’ flows tend to increase with their nervousness, leading to even higher sectors’ rotation.
e-fundresearch: What are the special challenges in this environment?
Kishimoto: The special challenge is that, although fundamentals in Japan are attractive, market timing becomes an important factor because of the perturbations coming from global equity markets.
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Kishimoto: The main objective is to build on the good start of the fund and capitalise on the renewed interest from investors for Japanese equities since the end of last year. Going forward, we would like to demonstrate that it is possible for investors to make money in the Japanese market over a long period of time.
e-fundresearch: Do you model yourself on someone? Any ideals?
Kishimoto: These days, my models are probably not in the asset management field anymore. I am delighted to be working with younger, and yet very experienced people and I am thriving from their energy. Although we are sharing the same investment philosophy and techniques, I really appreciate confronting our different perspectives, coming from our respective experience. Therefore, I would maybe like to go further and get younger people that we could interest to our industry, because the number of fund managers in Japan has unfortunately tend to decrease over the years. It is not about creating a legacy but I would take great joy and pride in passing the things I have learned to others, in the same way craftmen used to do.
e-fundresearch: What motivates you in your job?
Kishimoto: Financial markets have been my daily obsession for as long as I can remember. But I am a bit of a perfectionist, and so remain under the belief I can still get better in my job.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Kishimoto: Alpha Japan is one of the few independant asset management company in Japan and we want to keep on developing the company, by attracting or developing people who share our investment philosophy but also general mindset.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Kishimoto: I have never envisioned myself in any other capacity than as a fund manager. I am a big fan of table tennis and I would say that only sport could have provided a similar environment of high competition and excitement, as well as thorough discipline and total dedication. But unfortunately sport athletes’ careers are too short!
e-fundresearch: Thank you for the interview!
