Investment Philosophy and Strategy
What are mid/small-cap firms?
We define mid/small-cap firms as those firms listed on the Tokyo Stock Exchange with a market cap of fewer than 100 billion yen. About 3,000 of the 4,000 listed firms in Japan are mid/small-cap firms. Compared to large-cap firms, mid/small-cap firms get relatively less exposure to the media, and may not be researched by institutional investors, a lack of informational symmetry which provides ample investment opportunities.
Philosophy and strategy on mid/small-cap firms Investment
- Why mid/small-cap firms?
- We believe there are many investment opportunities in areas where price formation is distorted as a result of lack of competition and great information asymmetry. They are frequently lurking in the mid/small market. That is why we have chosen to emphasize research into that market.
- Finding hidden investment opportunities in the industrial value chain through bottom-up research
- We are committed to so-called “value-chain analysis”, following the flow of products and information, and do not employ the vertical system of having people responsible for sectors in our corporate and industry analysis. Based on that, how we uncover hidden jewels and investment opportunities in the value chain, by means of bottom-up research involving relentless, thorough-going “going and seeing”.
Main features of our corporate analysis work
- Feature 1: Thousands of annual in-depth corporate analyses (bottom-up research)
Our analysts conduct about one thousand times interviews and on-site research per year, with the investment team handling several thousands in total. Our creed is to “go and see”, visiting the companies, touring their factories, and seeing their stores, and analyze the companies’ growth strategies and shifts in the industry’s dynamics based on discussions with management of the companies we invest in and their investor relations.
Since our founding in 2005, our continuous dialogs with investee companies have been our huge asset, and we have a one and only unique database containing the results of the tens of thousands of research we have done.
- Feature 2: A high degree of freedom in research without specific sector assignments
- We do not take the so-called “sector coverage” approach where the analysts only cover their own vertical or specific industry. There are no harmful effects from splitting up industries vertically or politics of jostling for company assignments. Analysts are free to analyze any company as long as there is a realistic prospect of it contributing to return for our clients.
We also impose no geographic restrictions. We start with every corner of Japan, and in the past have traveled to countries like China, Russia, and Israel for research.
The flip side of not having such silo is that we can cover that industry sector completely from upstream to downstream, allowing us to identify excellent companies hidden in the value chain, and work to discover exciting investment ideas every day.
- Feature 3: Commitment to sharing information among the investment team when selecting investee companies, and flat discussions
- All of the huge amounts of information and investment ideas obtained from our daily research is shared and discussed among the investment team. We prefer a style where everyone participates in the discussions on an equal footing, regardless of their title or seniority, with repeated, in-depth debates, to generate ideas as a team.
We honor this process which gives rise to a new perspective on research and leads to the discovery of new investee companies. We assuage the isolation sometimes felt in financial market and decision making by means of our sharing and discussions.
Award history of the fund on our investment advisory
||“Best Japan Hedge Fund” Award (Eurekahedge)
“Best Singapore Hedge Fund” Award (Eurekahedge)
||“Japan Equities Long/Short” Award
“Three-Year Investment Performance Equities Long/Short Section” Honorable Mention (HFM Week)
||“Singapore Best Thematic Manager”
“Best Japan Hedge Fund” (AI Global)
||“Japan Equities Long/Short” Honorable Mention (HFM Week)
Ranked “First in Three-Year Equities Long/Short Fund” (Berkeley)
||“Global new Manager (Asia Section)” Award (S&P Capital IQ/New Legacy Group)
“Best Japan Hedge Fund” Award
“Best Asia Equities Long/Short Fund” Award (Eurakahedge)
||Ranked “First in 2013 Full-Year Equities Long/Short Fund” (Berkeley Hedge)
“Top Fund for 2013” (Preqin)