M&G Japan Smaller Companies

M&G Japan Smaller Companies is a bottom-up, valuation-sensitive fund that aims to provide a combination of strong capital growth and income by investing in Japanese mid and small-caps. The management team’s investment philosophy is focused on using their rich understanding of the region and breadth of analytical expertise to uncover the most attractive opportunities.

Our opinion

Carl and his team have delivered excellent long-term performance in a very tricky and high-risk market. This is thanks to the team’s vast experience and deep knowledge of the companies they invest in and what their drivers are. Their strong engagement strategy with companies helps them uncover unique investment opportunities. The fund should be a strong consideration for anyone looking for Japanese smaller companies exposure.

Fund manager

Fund manager Carl Vine is based in London, alongside deputy fund manager David Perrett. Carl is responsible for running the company’s Japanese portfolios, and David runs the Asia funds. Carl has over 20 years of investment experience, having begun his career with Prudential in London, and then relocating to Tokyo to open the Japan office. He went on to work in Hong Kong for SAC Capital Advisors and UBS. Carl and David co-founded boutique investment firm Port Meadow Capital in 2014, both subsequently joining M&G in 2019 as co-heads of Asia Pacific Equities. The two managers have worked closely together for many years and are supported at M&G by a team of eight analysts and other investment specialists. Analysis is run regionally within this team.

Carl VineFund manager

Investment process

The fund’s investment approach is built around four key principles: Independence, Conviction, Fallibility, and Uncertainty.

- Independence: The team generates unique investment ideas by maintaining a differentiated approach from other investors.
- Conviction: They ensure that every decision is made with confidence, particularly in navigating market volatility, committing capital only when they have a competitive edge.
- Fallibility: The team recognises the inevitability of mistakes and bad luck, designing a strategy that can still succeed despite these challenges.
- Uncertainty: Acknowledging that much of a security’s value lies in the unpredictable future, they focus on pricing risk, rather than attempting to forecast outcomes.

The team analyses a core universe of over 250 Japanese companies, supplemented by insights from a broader Pan-Asian perspective. While valuation screens are used, the team’s most compelling investment ideas typically emerge from thorough research and ongoing dialogue with company management. The portfolio is concentrated, usually holding fewer than 50 companies, with each stock’s weighting reflecting the managers’ level of conviction and the company’s potential.

ESG

ESG - Integrated

M&G believes that ESG factors significantly impact long-term investment outcomes and aims to achieve the best risk-adjusted returns for clients by integrating ESG criteria into investment decisions. This approach is applied across all asset classes and sectors, considering ESG factors as essential components of the investment process. The investment teams engage in regular dialogues with company executives to ensure alignment with long-term shareholder interests. M&G’s Stewardship & Sustainability team assists fund managers with ESG issues, coordinates stewardship and responsible investment activities, engages with companies on governance and sustainability matters, manages voting responsibilities at shareholder meetings, and maintains constructive dialogues with company management to uphold long-term shareholder responsibilities.

Risk

The fund’s risk management is closely overseen by Carl Vine and M&G’s Equity Risk team. They monitor both absolute risk and risk relative to the Russell/Nomura Mid-Small Cap Index, with a focus on ensuring that the fund’s risks align with its objectives. Given the bottom-up approach, the primary source of risk is expected to be stock-specific. The team works to identify and mitigate any unintended risks, including those related to macroeconomic factors such as currencies and interest rates.

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