Ronald Slattery, Fondsmanager, "Fidelity Funds - Japan Advantage A-JPY" (ISIN: LU0161332480) (19.03.2012): "Since the last year’s earthquake, the Japanese economy plotted a v-shaped recovery as supply-chain disruptions were quickly resolved and manufacturing facilities were brought online ahead of schedule. However, following a strong rebound in the third quarter of 2011 (annualised real GDP surged by 7.1%), economic activity slowed, with structural fragilities in Europe, yen appreciation and fresh supply-chain disruptions stemming from the floods in Thailand negatively affecting Japanese exports. While the slowdown in overseas economies and the delayed start-up of reconstruction projects hampered output temporarily, production activity should gradually return to a recovery path. Forecasts for February and March point towards positive growth and are consistent with recent improvements in leading indicators such as the Institute of Supply Management’s New Orders Index for US manufacturers and the Chinese Purchasing Managers’ Index. Furthermore, the Bank of Japan’s recent move to expand its asset purchase program by ¥10 trillion and redefine its price stability goal has provided a welcome boost to sentiment. While Japan has made significant strides in recovering from the earthquake, structural issues such as energy policy and the potential for future power shortages, the hollowing out of industry and fiscal deterioration were exacerbated by the events of last March, and require clear strategic policy initiatives from the ruling authorities." Jens Hansen, Portfolio Manager, „ValueInvest Lux Japan A Cap“ (ISIN: LU0135991148) (21.03.2012): "The Japanese society is facing many challenges today; lack of economic growth, an astronomical debt and public budget deficit, a political system which seems paralyzed and not capable of the necessary structural changes, and a demography which makes matters even worse. And as if these structural problems were not enough, Japan was hit by a devastating earthquake in March 2011, which triggered a tsunami and led to a nuclear crisis the full scale of which is not yet known. At best, one can hope that the reconstruction after the tragic earthquake is seen as a catalyst for the Japanese economy. Although the Japanese domestic market does not inspire confidence in future growth, the strength of the Japanese economy is the fact that Japan, unlike other developed economies, has not only maintained its industrial heritage, but also developed a strong competiveness for such industries as e.g. car manufacturing and electronics based on high quality and innovation. After the earthquake in March 2011 it became obvious how important Japan actually is in the global supply chain. As growth has to be generated outside of Japan many Japanese companies increased their investments in Asia and have been rather successful in increasing the export to the surrounding growth markets. The Japanese economy is now more closely linked to Asia than to Europe and the USA. An impressive 56.3% of Japan’s total exports went to Asia in 2010, and China has become Japan’s largest export market, representing 19.8% of total exports in 2010. This should be compared to 16.5% and 12.0% for the USA and Europe, respectively. In 2010 Japan had a trade surplus with Asia, which was 65% higher than that with the USA and Europe combined. Ten years earlier Asia only accounted for less than 36% of the trade surplus with the USA and Europe. It would definitely be wrong to dismiss Japan. Production and innovation have not left Japan, and, most importantly, many Japanese stocks are fundamentally cheap.
Andrew Millward, Morant Wright Fondsmanager, "OYSTER Japan Opportunities JPY" (ISIN: LU0204987902) (19.03.2012): "There have been a number of positive developments in the last few months, which comes after a difficult year for Japan with the devastating earthquake and tsunami in March 2011. The Government passed a very large economic stimulus package in December, worth ¥12trn, which will be used for reconstruction in earthquake-affected Tohoku and should help support economic growth this year. As a result Daiwa is forecasting economic growth to be 2.0% in 2012 after a contraction of 0.7% last year. More recently, the Bank of Japan announced an expansion of its asset purchase scheme by an additional ¥10trn and, more significantly, emphasised its inflation goal of 1%. Since then the yen has weakened against the dollar and euro, which should be positive for exports and corporate earnings. Recent economic data has also turned more positive. Industrial production grew by 3.8% month on month in December and 1.9% in January, and is forecast to continue to recover. Retail sales have also been much stronger than expected since December, while car sales have shown very strong growth. One of the key risks remains the nuclear situation. Almost all of Japan´s 54 nuclear reactors are closed for maintenance, which has resulted in increased imports of oil and gas. Although Japan´s companies and households have cut back their electricity usage, a longer-term solution needs to be found."
e-fundresearch: "Which are the most important elements in your investment process and which benchmark is used?"
Ronald Slattery, Fondsmanager, "Fidelity Funds - Japan Advantage A-JPY" (ISIN: LU0161332480) (19.03.2012): "The fund aims to outperform the Russell/Nomura Total Market Value Index. The value investment style has a long history of outperformance in Japan and we believe it will continue to be rewarding over the long-term. The manager follows a value-oriented stock picking strategy. He focuses on companies that are cheap on the normalized Price-Earnings-Ratio (PER) and/or Price-to-Book-Ratio (PBR) adjusted for unrealized gains/losses. His investment approach places more emphasis on valuation than catalysts for changes or growth drivers, and investment decisions are driven by target prices he sets for each stock based on the two key valuation metrics PER and PBR. The fund’s unique strength is the fact that the manager’s stock selection strategy is consistently guided by share price valuations. The manager does not follow or make bets on any particular themes. He tries to generate value added through discipline buy/sell decisions adhering to target prices, which are set based on the manager’s valuation analysis. This strategy has proven to be rewarding for the past five years, and we believe it will continue to add value to the fund."
Jens Hansen, Portfolio Manager, „ValueInvest Lux Japan A Cap“ (ISIN: LU0135991148) (21.03.2012): "The calculation of the fair value of a company is the first step in the investment process. ValueInvest invests in companies that have histories of stable, recurring operating profits. Earnings stability is key to valuing businesses as ValueInvest penalizes companies and industries for instability. We determine risk based on the historical earnings stability of a company and use five different sector specific risk categories. High earnings stability results in a lower risk premium used for calculating a company’s fair value while high earnings volatility demands a high risk premium. Furthermore, stocks in each Category also must pass a debt coverage test designed to weed out overly indebted companies. ValueInvest uses a benchmark agnostic approach to portfolio construction and thus deviates strongly from the MSCI Japan, which may be used as a reference index."
Bernadette Busquere, Sébastien Capron, Virginie Silicio, Fondsmanager, "Lyxor Equisys Fund Japan R2" (ISIN: LU0138170815) (22.03.2012): "The benchmark is the Topix Total Return Index."
Andrew Millward, Morant Wright Fondsmanager, "OYSTER Japan Opportunities JPY" (ISIN: LU0204987902) (19.03.2012): "Although the macroeconomic context in which a company is operating is a factor in their decision making, the stock selection process is entirely bottom up, rather than top down or macro driven.
The investment process starts first and foremost with the balance sheet. The managers are looking for financially sound companies with strong balance sheets. All balance sheet items are scrutinised but particular attention is paid to cash & investments, debt, property, pension funding and goodwill. The aim of the investment team is to perform a thorough analysis of the risk of the balance sheet to make sure there are no black holes. Generally speaking companies with high levels of cash and securities and low levels of debt are selected for investment. The quality of the franchise is also important. The second part of the process focuses on valuation and the potential for upside, which can come from profit growth, asset sales, corporate restructuring, M&A or higher payouts to investors. The managers typically look for a lower-than-market P/B ratio and a low EV/EBIT ratio (usually below 10x). Enterprise value is very important in the managers’ mind. Liquidity is an important element of the screening. The managers limit a holding to 1% of a company for each fund and a maximum of 5% across all the funds (i.e. at the group level). The managers will not buy a stock unless it can be a 1% position within the fund which therefore currently excludes stocks below a market capitalisation of Y50bn. The manager endeavours to meet investment candidates and existing holdings on a regular basis. All the managers travel to Japan once or twice a year, regular conference calls are held with companies and many are seen in London. Qualitative criteria include management track record, disclosure, attitude towards shareholders, the company’s positioning, franchise and strategy.The managers will then invest in those identified companies whose share price offer the potential to show significant growth over a period of up to 5 years. Investment decisions are made on a team basis. All prices are followed daily along with relevant news items so all of the fund managers are aware of the changing circumstances. Relevant company news would include earnings, share buybacks and dividends announcements, as well as general newsflow.The fund benchmark is the Topix Total Return index. However, the fund is not subject to any constraints relative to the benchmark as the strategy is entirely bottom up. Sector allocations are a result of stock selection. From a risk perspective, the fund manager is however “benchmark conscious” in relation to sectors."
e-fundresearch: "Which over- and underweight positions in stocks do you have currently implemented in your fund?"
Ronald Slattery, Fondsmanager, "Fidelity Funds - Japan Advantage A-JPY" (ISIN: LU0161332480) (19.03.2012): "The fund remains overweight in oversold cyclicals. At a sector level, the transport equipment sector is the largest overweight sector. Following a spate of natural disasters, 2012 looks to be a year of recovery from supply chain disruptions for Japanese auto makers. Defensive segments are generally underweight, but exposure to high-yielding pharmaceuticals companies remains significant. At a stock level, the fund’s largest overweight position relative to its benchmark is in a leading branded drug company, Astellas Pharma. The company upgraded its full-year guidance to reflect brisk sales of core treatments and raised the prospect of a dividend hike. Valuations are historically attractive and it remains a key holding. Another key holding is Sumitomo Mitsui Financial Group, which remains the most attractive stock in the bank sector based on both earnings- and asset-based metrics, as well as dividend yield."
Jens Hansen, Portfolio Manager, „ValueInvest Lux Japan A Cap“ (ISIN: LU0135991148) (21.03.2012): "In line with previous years ValueInvest LUX Japan consists of a highly concentrated portfolio of undervalued stocks, tilted to earnings stable sectors which are less dependent on export demand.
The current portfolio consists of 27 stocks and more than half of the assets are invested in Consumer Staples and Healthcare companies. The fund has generally no exposure to the financial sector. The weighting of the convenience store chain Circle K Sunkus was lifted to 6% due to a recent takeover offer from its majority shareholder Uny and now represents the largest position of the fund."
Bernadette Busquere, Sébastien Capron, Virginie Silicio, Fondsmanager, "Lyxor Equisys Fund Japan R2" (ISIN: LU0138170815) (22.03.2012): "Biggest overweight are KDDI Corp, K’s Holdings and JGC Corp; biggest underweight are Toyota Motor, canon Inc and Honda Motor."
Andrew Millward, Morant Wright Fondsmanager, "OYSTER Japan Opportunities JPY" (ISIN: LU0204987902) (19.03.2012): "As stated previously the stock selection process is entirely bottom up, meaning that any stock active bias will result from the managers stock picking decisions. As of end February 2012, the 3 largest fund overweight positions are Fuji Media Holdings, Nippon Television Network and Sumitomo Electric Industries, which are also among the fund´s top 10 holdings. All three stocks have strong balance sheets and low valuations; Fuji Media, for example, has net cash and investments almost equal to its market cap and trades on a P/B ratio of 0.6x. Fuji Media and Nippon Television are the two leading TV broadcasters in Japan, which is currently experiencing a recovery in advertising spending, while Sumitomo Electric is a leading global player in several markets including wire harnesses for cars, superconductors and semiconductor materials. The 3 largest fund underweight positions are stocks not held in the fund, namely Toyota Motor, Mitsubishi UFJ Financial Group and Honda Motor. From a bottom up perspective, a company must fit with the quality and valuation criteria of Morant Wright to be part of the portfolio; stocks are not held simply because they are large index constituents."
e-fundresearch: "Please comment on the performance and risk parameters of your fund in the current year as well as over the past 3 and 5 years."
Ronald Slattery, Fondsmanager, "Fidelity Funds - Japan Advantage A-JPY" (ISIN: LU0161332480) (19.03.2012): "The fund’s risk/reward parameters have not changed since the current manager took over the fund from his predecessor in 2007. The fund’s strategy is not wedded to any particular market cap size, sectors or investment themes. The fund’s exposure to key macro economic risks including interest rates, currency, and commodity prices have always been managed within a relatively narrow range. However, the fund is not immune to factors that drive Japanese equity returns. The yen is one of two major forces at work over the last decade, and global equity markets (particularly the US) are the other. The Japanese market in US dollar terms has moved in line with the US market. Although this trend was temporarily broken due to the earthquake, the Japanese market has shown strong correlations to the US equity performance."
Jens Hansen, Portfolio Manager, „ValueInvest Lux Japan A Cap“ (ISIN: LU0135991148) (21.03.2012): "In January and February of 2012 stock prices of Japanese companies forming part of the MSCI Japan soared by more than 6.8% measured in EUR. As for the global stock market the market sentiment in Japan is improving proportionally with the liquidity injections from the central banks around the world. The tangible result for the Japanese stock market in the beginning of 2012 was that Financials was the best performer among the 10 main MSCI Japan sectors followed by Consumer Discretionary, Industrials and Materials. In this “risk-on” environment and with no investments in financials but a high exposure to Consumer Staples and Healthcare ValueInvest LUX Japan could naturally not keep up with the strong market development in these two months. The strength of the investment process usually unfolds over longer time periods. Over 3 and 5 years ValueInvest LUX Japan strongly outperformed the MSCI Japan Index, in combination with a lower risk, measured by the annual standard deviation. The overall portfolio can be characterized by a low beta in both periods as well as a high tracking error, which indicates large differences in portfolio composition relative to the MSCI Japan Index."
Bernadette Busquere, Sébastien Capron, Virginie Silicio, Fondsmanager, "Lyxor Equisys Fund Japan R2" (ISIN: LU0138170815) (22.03.2012):
Andrew Millward, Morant Wright Fondsmanager, "OYSTER Japan Opportunities JPY" (ISIN: LU0204987902) (19.03.2012): "Since the beginning of the year, up to end February, the fund is up +10.0%, which compares with +14.8% for the Topix index. Large capitalization stocks performed best: the Topix Core 30 index surged +19.7% over this time period, in comparison to +9.9% for the Topix Mid caps index. Export-related stocks are expected to benefit from the weaker yen recently and have performed well. Given the fund’s domestic mid cap focus it underperformed. Over the last 3 years (February 2009 – February 2012), the fund returned +9.7%, in comparison to +17.5% for the Topix index. Over this period, the fund underperformance was concentrated in Q3 2010 and was partly due to the poor performance of two specific holdings (Fuji Media Holdings and Nippon Television Network), both of which were among the top 10 stocks held. The two TV companies were sold off on concerns about the prospects for advertising revenues. The fund added to both positions during the quarter which subsequently rebounded in Q4. Over the last 5 years (February 2007 – February 2012), which was characterized by a challenging market environment, the fund outperformed its benchmark by +650 basis points, down -41.1% vs -47.6% for the Topix index; over the same time period, its peer group was down -51.9%, placing the fund within the 7th percentile. In 2008 the fund avoided the worst of the financial crisis by holding domestic stocks with strong financial positions, which were less affected by the crisis. Following the crisis, the valuation of the overall market fell to well below book value presenting the fund managers with many new opportunities. The fund was able to capture the upside in the market by switching into some slightly larger domestic and global stocks with strong balance sheets and high quality franchises which recovered along with the global economy.
In terms of risk parameters, the fund volatility is among the lowest of its peer group, 17.9% over 3 years and 17.8% over 5 years. Over the same time periods, the data for the index are respectively 17.9% and 20.3%, and 20.0% and 22.6% for the peer group."
e-fundresearch: "Did your fund outperform or underperform vs. benchmark over the past 5 years and which part could be linked to securities selection (Performance Attribution)?"
Ronald Slattery, Fondsmanager, "Fidelity Funds - Japan Advantage A-JPY" (ISIN: LU0161332480) (19.03.2012): "The fund consistently outperformed its benchmark (Russell/Nomura Total Market Value Index) as well as the broad market represented by TOPIX over the last one, three and five years.
The fund generated roughly about 60% of its outperformance through stock selection between 2007 and 2010. However, it was sector selection that generated outperformance in 2011.
The fund manager’s value based approach found favour in a volatile market environment, and the fund outperformed the benchmark index since he took over the fund from his predecessor on 1 February 2007. Stock selection was successful in the construction and machinery sectors, where many stocks were traded below their book value. In the construction sector, the single largest contributor was TOC, Tokyo-based property leasing company, whose share price surged in response to a take-over bid by its competitor. The fund’s overweight exposure to the marine transportation sector and limited exposure to power utilities also paid off.
The fund outperformed its benchmark index. Stock selection was particularly rewarding in the other finance, banking and chemicals sectors. Furthermore, underweighting the electrical machinery and transport equipment sectors proved prudent, as technology and automobile exporters plummeted due to concerns about a global recession and yen appreciation. In the other finance sector, holdings in consumer loan companies, Acom and Promise rose on easing credit concerns and expectations for earnings upgrades. In the banking sector, underweighting Mitsubishi UFJ Financial Group and Mizuho Financial Group proved prudent amid persistent turmoil in global markets and concerns about equity financing risk. In the chemicals sector, major contributors were a mix of defensive and cyclical stocks including Kobayashi Pharmaceutical, Tokuyama, and Central Glass.
The fund outperformed its benchmark and posted strong absolute returns. A cyclical upswing driven by inventory restocking and signs of stability in some economic indicators spurred the performance of holdings in cyclical exporters. Stock selection was particularly rewarding in the electrical machinery with Canon and TDK being top contributors. Stock selection within the automobile value chain also paid off. Auto parts makers including Aisin Seiki, Koito Manufacturing, and Toyoda Gosei ranked among the top 10 contributors. Moreover, a lack of exposure to power utilities, which suffered a sharp return-reversal after the strong performance in 2008, proved prudent. However, stock picks in defensive sectors including communications and pharmaceutical detracted from relative returns.
The fund’s outperformance was driven by successful stock selection in the banking, transport equipment and information & communication sectors. Holdings in the banking sector rebounded due to supportive policy measures, greater visibility regarding global regulations and a rise in long-term rates. In the transport equipment sector, underweighting Toyota Motor amid its extensive product recall in the US market proved prudent, while a holding in Fuji Heavy Industries added value as the company upgraded its earnings projections for fiscal 2010. On the other hand, stock selection struggled in the electrical machinery sector. Underweighting Sony proved detrimental, but its valuation in terms of cyclically adjusted PE multiple does not look attractive relative to the market. Last year’s major contributors including TDK fell on profit-taking and ranked among largest detractors.
The fund returned -16.7% in yen terms, outperforming its benchmark index Russell/Nomura Total Market Value Index, which fell by 18.8%. The fund’s outperformance relative to its benchmark index for the year was largely attributable to its sizeable underweight exposure to power utilities. Stock selection among domestic consumer staples and healthcares also proved prudent, as investors sought a safe haven of defensives from market turmoil. On the other hand, holdings in electronic parts and material makers, where the yen’s sharp appreciation and decelerating global demand pose a threat to earnings growth, fared poorly."
Jens Hansen, Portfolio Manager, „ValueInvest Lux Japan A Cap“ (ISIN: LU0135991148) (21.03.2012): "While the MSCI Japan had a negative performance in EUR of more than 26% over the last 5 years (March 2007 to February 2012) ValueInvest LUX Japan protected the assets of investors and posted only a slightly loss of 42bp during the same period. The cautious investment strategy of ValueInvest LUX Japan delivered investors thus with an annualized outperformance of 5.78% versus the MSCI Japan in EUR over the last 5 years (as of 29.02.2012). As the fund is always fully invested and does not allocate to cash, this strong outperformance was a pure result of the stock selection process which focusses on undervalued earnings stable businesses with low debt."
Bernadette Busquere, Sébastien Capron, Virginie Silicio, Fondsmanager, "Lyxor Equisys Fund Japan R2" (ISIN: LU0138170815) (22.03.2012): "Performance data see answer above. Concerning the performance attribution, most of the performance comes from stock picking except in 2008 when the fund reduced its net exposure through its beta management tool."
Andrew Millward, Morant Wright Fondsmanager, "OYSTER Japan Opportunities JPY" (ISIN: LU0204987902) (19.03.2012): "As detailed above, the fund outperformed its benchmark over the last 5 years (February 2007 – February 2012) by +650 basis points, down -41.1% vs -47.6% for the Topix index. Stock picking was the main driver of the fund outperformance as the fund outperformed its benchmark in 6 out of the 8 invested MSCI sectors, and in line in one of them. As the fund investment process is entirely bottom up, stock picking is the main source of alpha generation over time."
Alle Performance Daten per 12.03.2012: