Japan Equity

IUP Zennor Japan Fund

The Fund

The investment landscape is changing in Japan as companies, particularly smaller ones, increasingly focus on shareholder returns amid an ongoing corporate governance revolution that is gathering pace. This offers abundant opportunities for the fund’s experienced stock-pickers, who have access to local markets (around 50 per cent of Japan's stock market isn't covered by analysts), to exploit. This provides significant long-term growth potential for investors.

A Brief Introduction

"There’s an extraordinary long-term opportunity in Japan, catalysed by the corporate governance evolution, which we believe will finally unlock the abundant value in many Japanese stocks, particularly lower down the market-cap spectrum."

James Salter Portfolio Manager

Focused on delivering strong capital growth over the long term

Invests across the market cap spectrum with a particular focus on smaller companies

Experienced team of stock-picking fund managers with their own extensive network in Japan

Fund summary
company-logoLearn more about Zennor
company-logoResponsible investing and stewardship
FUND SIZEUS$736.5m
LAUNCHFeb 2021
ANNUALISED RETURN19.97%*
HOLDINGS37
SFDR DISCLOSUREArticle 8

Investment Team

  • James Salter headshot
    James Salter

    Portfolio Manager

    James spent his early career managing Japanese equities initially at Foreign & Colonial before stints at Martin Currie and Schroders. He joined Polar Capital as a founding partner in 2001, where he subsequently worked for 19 years before founding Zennor Asset Management in 2020.

    Academic Qualifications

    Degree in classics from Reading University. Masters in Japan Area Studies from the School of Oriental and African Studies.

    Professional Qualifications

    CFA

    Time at Zennor

    5 years

    Industry Experience

    36 years

  • David Mitchinson headshot
    David Mitchinson

    Portfolio Manager

    David started his career at Framlington in 1998, managing a Japan fund before joining JPMorgan and moving to Tokyo in 2004. On leaving JPMorgan in 2013, he spent just over two and a half years with the Abu Dhabi Investment Authority, returning to the UK with TT International in 2016. He joined Zennor in 2020.

    Academic Qualifications

    MSc Economics, St Catherine's College, Cambridge University

    Professional Qualifications

    CFA

    Time at Zennor

    5 years

    Industry Experience

    26 years

Monthly FactsheetAs at 28 February 2025
FUND SIZE
US$736.5m

Factsheet commentary

The Fund fell by -2.1% over the month which was less than the broader Japanese markets, which fell by -3.7%. Returns since inception are +109.2%.

Some highlights included excellent nine-month results from Fuji Seal International (7864), where profits rose by +54% led to the stock rising +13% during the month. We also saw a strong set of numbers from Nittetsu Mining (1515) and some further signs of capital allocation change. The shares rose by +22% and are also benefiting from a recovery in the copper price. We spoke to Kurimoto (5602) a few weeks ago. Although performance is only average at best, the balance sheet has further restructuring possibilities, and we suggested further buybacks and reductions in cross-shareholdings. There has recently been some attention on poor water infrastructure/sewage pipework in Ibaraki Prefecture and the shares have been performing well. Fuji Media Holdings (4676) rose by +9.4%. A huge scandal has engulfed the company and put senior management in an extremely delicate situation. Mass resignations have happened, but we are waiting for the “power behind the throne” to step down and this would clear the path to radical reorganisation of the company. The company has many leased assets with significant unrealised gains and a war chest of long-term investment securities.

Parent/Child consolidation is a key theme in the fund. Both Nohmi Bosai (6744) and Shin-Etsu Polymer (7970) have two high profile companies; Secom (9735) and Shin-Etsu Chemical (4063) as parent owners. The Tokyo Stock Exchange (TSE) has again reiterated its intention for Parent companies to justify why such entities should be listed. We expect further scrutiny in the coming year. Both companies have low beta’s and offer a lot of optionality regarding either full consolidation or sale to a third party.

We have bought a large position in Kyocera (6971). The company still has some attractive cash cow businesses and potential growth segments. However, 20% of total assets are a drag on profits. The biggest cash cow is the printing business which includes industrial tools and printheads. The growth drivers that we like are fine ceramic parts used in the semiconductor production equipment (SPE), ceramic packaging, and passive components. The areas which we think are likely to be divested are organic packaging, auto components, sensors and control equipment, solar and handsets. These areas have literally thrown away cash and we have seen impairment losses, allowance losses in polysilicon and huge losses in the USA operation (KYOCERA AVX). R&D and capex costs have been unusually high over the last five years. The company’s balance sheet is extraordinarily strong. Its market cap is ¥2.6 trillion but there is ¥200bn of net cash and ¥1.7 trillion held in KDDI (9433) shares. The unwind of these shares (1/3) is now underway.

The fund sold its position in MS&AD Insurance Group Holdings (8725). We bought the shares extremely well and it has benefitted from capital allocation change and a ruthless selling down of cross shareholdings. A decent amount of the net proceeds is being used on buybacks. We have added to our deeply discounted regional bank, Kyoto Financial Group (5844). Piolax (5988), a long-term holding was also sold as it announced a tender offer for 25% of the company, and we took advantage of that given it still has too much sales exposure to the Nissan Group.

The overall market has had a weak start to the year. Corporate earnings were perfectly satisfactory, but it was also clear that if you were to strip out the benefits of a weaker yen, then the manufacturing sector is underperforming more domestic areas of the economy. The threat of tariffs and secular worries regarding autos and cyclical concerns regarding technology have led to those sectors underperforming the market. The fund continues to focus on stock selection and over the earnings period avoided most of these companies who have either produced poor earnings or are under threat of tariffs.

Top holdings (%)

1Kyoto Financial Group6.0
2GENDA Inc5.7
3Fuji Media Holdings5.0
4GNI Group4.6
5Kyocera3.9
6Shiga Bank3.6
7Secom3.6
8Canon Marketing 3.5
9Toyota Industries3.5
10Daiei Kankyo3.4
11TSI Holdings3.4
12Hachijuni Bank3.3
13Lifedrink3.3
14Nittetsu Mining3.3
15Toda Corp3.1
16Toyo Suisan Kaisha3.0
17Nohmi Bosai2.9
18Kurimoto2.7
19Arealink2.6
20Fuji Seal International2.4
Total72.8

Sector allocation (%)

Industrials27.1
Information Technology14.9
Materials14.5
Financials14.4
Consumer Discretionary9.1
Consumer Staples7.3
Health Care6.4
Communication Services5.0
Real Estate2.6
Cash1.3

Geographic allocation (%)

Japan 101.3
Cash1.3

Market capitalisation (%)

Created with @product.name@ @product.version@
>$5 bn14.0%
$1 - $5 bn46.5%
<$1 bn40.8%
Cash-1.3%
Source: Citibank Europe plc, Luxembourg Branch and Spring Capital Partners Limited as at 28/02/2025.

Performance

Performance since launch of share class (%)

    Performance summary (%)

    Prices and Dividends

    Share class details

    Show all codes
    Share ClassISINLaunch dateMinimum investmentManagement fee (%)OCF (%)
    I Acc JPYLU226120351208 Feb 2021¥100m0.851.10
    I Acc USDLU242747429604 Jan 2022$1m0.851.10
    I Acc GBPLU232145943506 May 2021£1m0.851.10
    I Acc EURLU239414320514 Oct 2021€1m0.851.10
    Source: Citibank Europe plc, Luxembourg Branch. The fund is priced at 12 noon, daily, Luxembourg time.

    Price history

    Income and tax status

    Dividend frequencyAnnually
    XD dates31 December
    Tax statusUK Net
    Pay dates28 February

    Dividend history

    Literature

    Fund Facts

    Key facts

    Morningstar categoryEAA Fund Japan Large-Cap Equity
    Launch date08 February 2021
    Fund typeLuxembourg Domiciled UCITS
    Dividend frequencyAnnually
    Country of registrationAustria, Cyprus, Finland, Germany, Italy, Greece, Luxembourg, Norway, Spain, Sweden, Switzerland, UK
    SFDR disclosureArticle 8
    Fund objective

    The investment objective is to achieve long-term capital growth and generate excess returns against the broad Japanese market by mainly investing in companies listed, domiciled and operating in Japan.

    Source: Citibank Europe plc, Luxembourg Branch as at 28/02/2025.

    Dealing and liquidity

    Dealing line+352 45 14 14 234
    Administrator emailContact
    Dealing fax+352 45 14 14 332/308
    Dealing frequencyDaily
    Price frequencyDaily
    Settlement termsT+3
    Dealing cut-off time12 midday (CET) T-1
    Valuation point12 midday (CET) T
    ISA eligibleYes
    SIPP eligibleYes

    Legal and regulatory

    • Administrator
      Citibank Europe plc, Luxembourg Branch
    • Custodian
      Citibank Europe plc, Luxembourg Branch
    • Depository
      Citibank Europe plc, Luxembourg Branch
    • Fund umbrella
      The Independent UCITS Platform
    • Management company
      Andbank Asset Management Luxembourg
    • Investment adviser
      Zennor Asset Management LLP
    • Accounting year end
      31 December
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