Aberdeen Japan returned enhanced by yen/sterling currency hedge – Aberdeen Japan Investment Trust (AJIT) has released its final report for the year to 31st March 2018.
The NAV of the company rose by 12.6% on a total return basis. By way of comparison, the TOPIX index of leading Japanese companies rose by 8.2% on the same basis. The total return of the share price was 7.5% over the same time period to the end of March, as the discount to NAV per share widened from 10.5%, to 14.6% at the year end.
Performance to end of March
The relative return of the company was enhanced by a currency hedge that the investment manager had put in place to act as a counterweight against the movement of the Japanese currency, the Yen and sterling. The hedge contributed 3.5% to the relative performance of the fund as sterling strengthened.
The relative performance would have been -0.1% without the currency hedge. The chairman of AJIT points out that this reflects the investment manager’s selective style, which applies a bottom-up, stock-picking approach, with an emphasis on long term performance. The market over the year did not discriminate between quality and non-quality stocks and both were subject to short term buying and selling by market participants.
Management fee
The management fee has been reduced with effect from 1 April 2018, from the previous rate of 0.95% of net assets up to £50m and 0.75% of assets above £50m, to just being 0.75% of net assets.
Chairman’s outlook
Neil Gaskell, Chairman:
“After a strong 2017 and the calm that global markets have featured for some time, markets corrected and volatility returned in early 2018. It is likely that more normal volatility can be expected for the rest of the year ahead as global synchronisation of economies and markets weakens.
In Japan, the Yen’s strength remains a perennial concern for the export sector, while Prime Minister Abe’s support has weakened in recent months which may dent his ability to push through less-palatable policies. One positive outcome of the recent market correction is that it brought company fundamentals back into focus, instead of the relatively indiscriminate buying experienced in 2017 when investment flows into Japan were particularly strong. The companies in the portfolio have considerable financial resources which should provide a buffer if the macro-economy worsens faster than expected. These companies know that potentially game-changing events like the trade issues between China and the US also present opportunities. Given their flexibility and nimbleness, these holdings should be able to take advantage of shifting market dynamics through product innovation and basic research and development.
The Manager’s consistent engagement with our investee companies over the long term has helped contain key risks, while improving the returns to the Company and its shareholders, through the unlocking of value of these mainly cash-rich, debt-free and conservatively-run businesses. Although the pace of corporate governance reform has been slow, progress has been positive and the changing mind-set is likely to remain long after Prime Minister Abe. While the overall picture may appear rather uncertain in the short to medium term, your Company is well positioned to meet these challenges.”
AJIT : Aberdeen Japan returned enhanced by yen/sterling currency hedge