Nippon Active Value IPOs with £103m – the trust had been hoping for £200m but, after a small delay, managed to get to £103m, which the board felt was enough to get going.
The trust is competing in the listed space with AVI Japan Opportunity but, in practice against a large range of well-resourced hedge funds. Target companies will be sub-$1bn market cap [weird how that isn’t defined in yen] and it will hold a concentrated portfolio of these, taking stakes of between 5% and 25%.
The investment adviser, Rising Sun, gets 0.85% of NAV as a fee. Rising Sun is a newly incorporated Cayman entity which will be led by James B. Rosenwald, III. Mr Rosenwald has over 40 years’ experience investing in Asia and is co-founder and managing partner of Dalton Investments LLC. Dalton is a value focused investment management firm with expertise in Asia equities and global equities. Headquartered in Santa Monica, California, with affiliate offices in Tokyo and Mumbai, Dalton manages (as at 31 May 2019) US$3.4 billion.
The prospectus outlines a number of activist strategies that it can employ to unlock value in Japanese companies.
- communication and dialogue with management teams and boards (including management meetings and letters and presentations to the board);
- putting representatives of the Company on the board of investee companies;
- making shareholder proposals. Shareholders who hold three per cent. or more of a company’s voting rights for at least six months can demand that directors call extraordinary general meetings regarding any matter that the shareholder calling the meeting is entitled to vote on under Japanese law;
- collective engagement with other shareholders;
- partnerships within the industry as well as turnaround specialists; and
- tender offer bids, typically as part of a consortium of other investors.
[AVI Japan Opportunity has made a good start and there is anecdotal evidence from other specialist Japanese funds that corporate governance is improving in Japan. It will be interesting to see what the fund can accomplish with just £103m to play with. It helps that the manager bore the launch expenses so the £103m is not reduced by these.]
NAVF : Nippon Active Value IPOs with £103m