Kames global fund goes overweight Japan

Added 17th November 2016

Kames Capital’s Global Equity Income fund has moved to an overweight position in Japan, with 10% of the fund now invested there versus the 8% benchmark.

Kames global fund goes overweight Japan

According to the manager of the £434.7m fund Mark Peden, the move has been inspired by the increasing adoption of shareholder friendly policies by corporates, which are facing mounting pressure from overseas investors to return cash to them in the current low growth, low inflation environment.

This pressure combined with the government pension fund’s desire for yield, the new corporate governance code and declining alternative uses for cash means better returns for shareholders via higher dividends and share buy-backs, Peden explained.

“In the mid-1990s shareholders were at the bottom of the corporate priority list in Japan,” he said. “Although the pace of change has been glacial, corporates have gradually become more shareholder friendly with improved investor relations, less irrational decision making and better returns for shareholders. The story is still in its infancy as the market yield is just 2.2% but the trend is clear, payouts are rising and companies have the firepower and willingness to increase dividends.”

“Japan doesn’t embrace change quickly, but once it does it embraces it enthusiastically,” Peden continued. “We believe yields will continue to rise and over time we expect other global income funds will also be looking to take advantage and increase their allocations.”

Peden also noted that Japanese balance sheets have improved over the last 15 years as companies have increased equity by 96% on average and payed down debt by 20%, meaning Japan now has more companies with net cash than most other major markets.

The fund holds a mix of mix of domestic and export-orientated stocks. Key holdings include tyre manufacturer Bridgestone, semiconductor equipment company Tokyo Electron, engineering recruiter TechnoPro and construction company Daito Trust.

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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