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Is it the perfect time to buy this little-known fund?

26 August 2014

Premier’s Simon Evan-Cook is backing one obscure portfolio he believes is perfectly placed to profit from developments in its sector.

By Jenna Voigt,

Editor, FE Investazine

Fund size has been a major topic of concern for investors over the last few years. The larger a fund gets, the more experts question whether the manager can continue to replicate their outperformance on a larger scale.

ALT_TAG Premier Asset Management’s Simon Evan-Cook (pictured) says this is why his multi-asset team likes to look for smaller funds that have the flexibility to outperform without the bulk of a swell of assets to hold them back.

One such fund he likes at the moment is the $145m Coupland Cardiff Japan Income & Growth fund.

“We were one of the first investors into that,” he said. “It’s just buying good, quality companies that are paying a sustainable dividend.”

In an FE Trustnet article last week
, Evan-Cook explained why he’d sold out of some of the UK’s most popular managers on fund sizes worries.

Evan-Cook thinks it’s a good time to buy into Japan because he believes the country is “on the cusp” of going from deflation to inflation, a transition which will benefit Japanese companies dramatically.

However, the manager says bonds are a “bad bet” and prefers equities to access an economic recovery in Japan.

“Japan is dead set on engineering inflation, and equities are more sensible because you get dividend growth [as well as income],” he said.

He adds that dividend growth is more important than capital appreciation because if you have dividend growth and yield, the capital appreciation will follow behind.

Still, Japan has been a volatile region and has been disappointing investors for the past two decades, apart from its strong rally in 2012 and the start of 2013.

Japanese equities are up 79.26 per cent since the start of our data for the Tokyo Topix in June 1998, though after a stellar rise in the late 1990s, the index has yet to regain its high over this time.

Performance of index since June 1998

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Source: FE Analytics

For this reason, Evan-Cook likes the 3.3 per cent yield from CC Japan Income & Growth because it adds an element of downside protection.

“Income assets are well underpinned,” he said. “Income assets have a big tailwind.”


The manager previously told FE Trustnet
the fund could be the next Invesco Perpetual Income, offering investors concentrated exposure to Japanese equities. The portfolio is made up of just 35 to 40 stocks, something Evan-Cook likes to see from every manager that he invests in.

He says managers who try and deliver an “all-weather” fund rather than backing their highest conviction ideas will often underperform, though he warns investors should expect certain periods of underperformance from high-conviction strategies.

CC Japan Income & Growth, managed by Richard Aston, aims to provide investors with long-term capital appreciation and income by investing in Japanese equities.

The fund is one of the best performing funds in the FCA Offshore Recognised Equity – Japan sector, having returned 15.74 per cent over the last 12 months. The sector made just 1.56 per cent over that period while the fund’s benchmark, the Tokyo Topix index, gained 2.34 per cent.

Performance of fund, sector and index over 1yr


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Source: FE Analytics

The fund only launched in February 2013 and since then it has doubled the returns of the Topix, having gained 36.5 per cent. The sector made even less, just 16.01 per cent over the period.

Performance of fund, sector and index since launch

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Source: FE Analytics

As Evan-Cook points out, the portfolio is highly concentrated, with 38.1 per cent of assets in the top-10 stocks.


Among the fund’s top holdings are Japanese auto manufacturer Toyota Motor, multinational imaging and optical manufacturer Cannon Inc and Japanese bank Aozora Bank.

According to the fund’s most recent factsheet, rising expectations for the US and Chinese economies boosted performance not just around the world, but also for Japanese equities.

“Japan benefitted from a robust earnings reporting season and indications that the impact of the consumption increase in April was not as bad as pessimists feared,” it said.

Aston also highlighted the increased pressure on Japanese corporates to “adopt more favourable attitudes to shareholders” pointing out the recent market surprise from industrial machinery manufacturer Amada.

The firm surprised the market with a new capital policy targeting a return on equity (RoE) of 7 per cent and an annual payout ratio of 100 per cent, comprising both dividends and share buybacks.

“The reduction of the corporate tax rate is expected to be an important component of the next stage of Abenomics due to its potential to boost the economy. At an individual company level it benefits those companies with strong domestic profits particularly and will provide a boost to RoE, cashflow and consequently shareholder return.”

The Dublin-domiciled fund has an annual management charge of 1 per cent and does levy a performance fee.
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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.