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Japan Dynamic Fund
Investing in volatile equity markets

Seize its dynamic opportunities

Investing in volatile equity markets

Japan is typically seen as a low growth economy with a rapidly ageing population, both of which keep the lid on domestic consumer spending. Yet Japan has always been a corporate, not an economic, revival story. Investors willing to look beyond economic data will discover a market that is attractively valued compared to global equities and offers opportunities on a bottom-up basis.

Japanese corporates are in a good shape owing to the gradual and steady restructuring over the last decade. The corporate reform story has resulted in improved trend profitability and higher operational efficiency. As a result, corporate earnings have remained resilient despite the pandemic.

Reasons to invest in Japan

Corporate reforms are driving profits

Profitability has generally improved on a trend basis; even during the height of the pandemic in 2020, the operating profit margins only fell to the peak level of the previous cycle. This was achieved by Japanese companies managing their capacity and cost base well.

A graph showing rising corporate profitability for Japanese companies

More Japanese companies are cash rich

Long-term restructuring efforts have included deleveraging of balance sheets, which has led to high levels of cash and offered many companies a level of flexibility in funding their ongoing operations.

More Japanese companies are cash rich

Japan is cheap compared to global peers

Despite resilient earnings and improved companies’ fundamentals, the market did not re-rate and is still valued much lower than other major markets. Lower starting valuations are supportive of likely future outperformance for the market.

A graph showing the value of Japan equities compared to global equities

in rising opportunities

At Eastspring Investments, our focus remains on identifying the many mispriced Japanese companies with good quality income streams that are yet to be recognised by the market. We expect the corporate reforms and structural changes have another five to ten years to play out. Investors who are keen to reap long-terms gains from this market may consider a strategic allocation to Japan equities in their portfolios for these reasons.

Eastspring Investments – Japan Dynamic Fund

A high conviction and unconstrained strategy A portfolio that is unconstrained by market cap or market’s thematic preferences, containing 30-50 of our best idea stocks that are undervalued according to their fundamentals.

Differentiated valuation approach Our value differentiator lies in our detailed analysis that looks for the longer drivers of a company’s sustainable earnings using a consistent valuation framework.

Choice of share classes The Fund is also available in SGD and USD hedged share classes. The hedged share classes offer investors returns that are correlated to the base currency (JPY) of the Fund.

Proven track record Highly experienced team with a track record of over 16 years of navigating Japan’s equity universe and delivering strong performance.

  • Details
  • Brochure

Eastspring Investments – Japan Smaller Companies Fund

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  • Details

Investment approach

Our differentiated investment approach enables us to see things differently. This approach systematically identifies “high impact valuation outliers” and is durable over time and market cycles.

invetment approach

Idea generation: Systematically look for mispriced assets. Focus on extremes. Identify maximum impact opportunities

Fundamental analysis Confirmation that value exists. Deepen understanding and test conviction

Portfolio construction: i) Establish & monitor the risk/reward relationship. ii) Link research output to portfolio construction and review

Risk control and review: Ongoing feedback supports sell-discipline. Ensure integrity of investment process

Eastspring's low volatility investment approach

Idea generation

Systematically look for mispriced assets. Focus on extremes. Identify maximum impact opportunities.

Eastspring's low volatility investment approach

Fundamental analysis

Confirmation that value exists. Deepen understanding and test conviction.

Eastspring's low volatility investment approach

Portfolio construction

Establish & monitor the risk/reward relationship. Link research output to portfolio construction and review.

Eastspring's low volatility investment approach

Risk control and review

Ongoing feedback supports sell-discipline. Ensure integrity of investment process.

Idea generation

Eastspring's low volatility investment approach

Systematically look for mispriced assets. Focus on extremes. Identify maximum impact opportunities.

Eastspring's low volatility investment approach

Fundamental analysis

Confirmation that value exists. Deepen understanding and test conviction.

Portfolio construction

Eastspring's low volatility investment approach

Establish & monitor the risk/reward relationship.
Link research output to portfolio construction and review.

Eastspring's low volatility investment approach

Risk control and review

Ongoing feedback supports sell-discipline. Ensure integrity of investment process.

Interview with Eastspring's Quantitative Team

Find out how our Quantitative Strategies team leverages technology and data to identify and exploit market inefficiencies caused by market volatility and behavioural biases.

Lead fund managers

Ivailo Dikov

Head of Japan Equities

Related insights

Keep abreast of developments with insights from our investment experts.

Japan’s good value creates alpha opportunities
Potential to benefit from a Yen rebound
Value investing in Asia: Japan is well positioned for ...
Uncover the value opportunities in Japan

Source

1 Asia Bond Monitor Summer Issue released in 2010 and 2020 by the Asian Development Bank. Data as of March.
2 J.P. Morgan, as of March 2020. Asian USD bond market size is represented by the market value of J.P. Morgan Asia Credit Index.
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DISCLAIMER

This material is exclusively for use by Professional Investors in European countries (“Professional” Investors refers to definition provided in Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004, the “MiFID Directive” as amended) and Qualified Investors in Switzerland.

This document is issued by Eastspring Investments (Luxembourg) S.A., 26, Boulevard Royal, 2449 Luxembourg, Grand-Duchy of Luxembourg. The issuer makes no guarantee of the accuracy and completeness of this document and is not responsible for error of transmission of factual or analytical nor shall it be liable for damages arising out of any person’s reliance upon this information.

Eastspring Investments is an open-ended investment company with variable capital ("Société d’Investissement à Capital Variable" or "SICAV") registered in the Grand Duchy of Luxembourg, which qualifies as an Undertaking for Collective in Transferable Securities (“UCITS”) under relevant EU legislation. The Management Company of the SICAV is Eastspring Investments (Luxembourg) S.A. (“Management Company”).

All transactions into the SICAV should be based on the current Prospectus and the Key Investor Information Document (KIID) of the relevant sub-fund in applicable local language. Such documents, together with the articles of incorporation, the most recent annual and semi-annual reports of the SICAV, may be obtained free of charge from the Management Company.

The SICAV may be actively marketed and is actually registered for offering in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Portugal, Switzerland and the United Kingdom.Please ask your usual contact for the full list of sub-funds and relevant share classes available in your country.

Where applicable, the SICAV has been notified and registered with the local European authorities in accordance with Directive 2009/65/EC, as amended. This marketing communication only refers to sub-fund(s) and share classes of the SICAV which have been passported for marketing and sale in the country of distribution of this material.

Prospective investors are invited to further consider the risk warnings section of the Prospectus. This document is solely for information and does not have any regard to the specific investment objectives, financial or tax situation and the particular needs of any specific person who may receive this document. It is not intended as an offer, a solicitation of offer or a recommendation, to deal in shares of securities or any financial instruments.

Please refer to the offering documents for details on fees and charges, dealing & redemption, product features, risk factors and seek professional advice before making any investment decision. An investment in the SICAV is subject to investment risks, including the possible loss of the principal amount invested. The value of shares in any sub-fund of the SICAV and the income accruing to the shares, if any, may fall or rise. Where an investment is denominated in a currency other than the base currency of a sub-fund of the SICAV, exchange rates may have an adverse effect on the value price or income of that investment. Investors should not make any investment decision solely based on this document. Investors may wish to seek advice from a financial adviser before purchasing shares of any sub-fund of the SICAV. In the event that an investor may choose not to seek advice from a financial adviser, the latter should consider carefully whether the sub-fund in question is suitable for him.

Past performance and the predictions, projections, or forecasts on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of the SICAV.

There are limitations to the use of indices as proxies for the past performance in the respective asset classes/sector.

Any sub-fund of the SICAV may use derivative instruments for efficient portfolio management and hedging purposes.

This document contains advertising. Subject to the availability of the sub-funds / share classes of the SICAV in your jurisdiction, the current Prospectus, KIID in your local language, articles of incorporation and the most recent annual and semi-annual reports of the SICAV may be obtained free of charge from the following entities:

Facilities Agent for European Economic Area:

Eastspring Investments (Luxembourg) SA, 26 Boulevard Royal, L-2449, Luxembourg

Switzerland - Representative and Paying Agents

The above-mentioned documents are available free of charge from the Representative Agent.

Representative Agent: First Independent Fund Services Ltd, Klausstrasse 33, 8008 Zurich

Paying Agent: NPB-New Private Bank Ltd, Limmatquai 1/am Bellevue, 8024 Zurich

United Kingdom - Facility Agent

Eastspring Investments (Luxembourg) S.A. - UK Branch, 10, Lower Thames Street, EC3R 6AF

For the purpose of UK law, the SICAV, is a recognized scheme under section 264 of the Financial Services and Markets Act 2000. Please note that the protections provided by the UK regulatory system, especially for retail clients, do not apply to offshore investments. Compensation under the UK Financial Services Compensation Scheme will not be available and UK cancellation rights do not apply.

Eastspring Investments companies (excluding JV companies) are ultimately wholly-owned / indirect subsidiaries / associates of Prudential plc in the United Kingdom. Eastspring Investments companies (including JV's) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with Prudential Assurance Company, a subsidiary of M&G plc, a company incorporated in the United Kingdom.

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Eastspring Investments (Luxembourg) S.A.
26 Boulevard Royal, L-2449 Luxembourg
Grand Duchy of Luxembourg
Tel: +352 22 99 99 57 63

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Prudential plc, incorporated and registered in England and Wales. Registered office: 1 Angel Court, London EC2R 7AG. Registered number 1397169. Prudential plc is a holding company, some of whose subsidiaries are authorized and regulated, as applicable, by the Hong Kong Insurance Authority and other regulatory authorities.

Prudential plc is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company Limited, a subsidiary of M&G plc. A company incorporated in the United Kingdom.

Copyright © 2021 Eastspring Investments (Luxembourg) S.A. All rights reserved.

Wei Ming Cheong

Portfolio Manager

Wei Ming Cheong joined Eastspring Investments, the Asian asset management business of Prudential plc, in November 2005. Wei Ming is a Portfolio Manager of the Fixed Income team and is responsible for managing and overseeing local currency fixed income strategies, including regional Asia, Singapore, Indonesia and RMB local currency fixed income funds. Wei Ming holds a Master degree in Finance from RMIT, Australia, and a Bachelor of Accountancy from Nanyang Technological University, Singapore.

Danny Tan

Portfolio Manager

Danny Tan joined Eastspring Investments, the Asian asset management business of Prudential plc, in February 2004. Danny is a Portfolio Manager of the Fixed Income team and is responsible for managing and overseeing portfolios of our insurance clients, as well as credit-focused portfolios. Danny is a CFA charterholder and holds a Bachelor of Business degree in Financial Analysis (Hons) from Nanyang Technological University, Singapore.

Ivailo Dikov

Head of Japan Equities

Ivailo Dikov is the Head of our Japan Equity focus team, and the Lead Portfolio Manager for the team’s Japan Focused Value strategies. He has over 17 years of investment experience, holds a Master of Business from the Tsukuba University in Japan and is fluent in Japanese.

Samuel Hoang

Portfolio Manager

Samuel Hoang is a Portfolio Manager in our Japan Equity focus team. Prior to joining the Japan Equity team, Samuel was a member of the Regional Asia focus team, and the Lead Portfolio Manager for our Vietnam Equity strategy. Samuel has over 17 years of investment experience, holds an MBA from Waseda University in Japan, and a Bachelor of Economics (Hons) from Foreign Trade University in Vietnam.

Rong Ren Goh

Portfolio Manager

Rong Ren Goh joined Eastspring Investments in January 2016 as a Portfolio Manager in the Fixed Income team and is responsible for the management of Global, Japan and selective Asian local currency fixed Income funds. Rong Ren has 12 years of investment experience and holds a Bachelor of Science (Hons) Economics from London School of Economics.

Fig 1: Corporate profitability is on the rise

A graph showing rising corporate profitability for Japanese companies
Source: Profit Margin % of sales from Refinitiv Datastream MOF as at 29 July 2022. Current Profits of all Japanese Incorporated Enterprises Industries (Except Finance and Insurance) / Sales, in Japanese Yen.

Fig 2: Japan’s non-financial companies have high levels of net cash

More Japanese companies are cash rich
Source: “Cash rich” companies based on Japan (Topix), US and Europe (MSCI indices) from Nomura, as at 15 August 2022. Companies ratio is the number of positive net cash companies divided by the number of index composite companies.

Fig 3 : Japan equities are attractively valued compared to global equities

A graph showing the value of Japan equities compared to global equities
Source: Eastspring Investments, IBES MSCI Indices, Refinitiv Datastream, as at 29 July 2022. Indices used: MSCI Japan Index, MSCI Europe Index, MSCI AC Asia Pacific ex-Japan, MSCI EM Latin America Index, MSCI AC World Index, MSCI USA Index.