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Impressive returns for Nippon Active Value Fund

230113 Japan

Nippon Active Value Fund (NAVF) announced its annual results for the year ended December 31, 2023. The company saw a strong NAV total return of 23.1%, with a share price total return of 41%, ahead of the benchmark MSCI Japan Small Cap index which returned 7.8% in sterling terms. The share price returned +41.1% over the year and has risen by 69.7% since inception (including dividends reinvested). The closing share price on 31 December 2023 was 162.0p, trading at a discount of 4.2% to NAV, a significant narrowing of the discount compared to the 16.3% for the year ended 31 December 2022. The average discount to NAV over the year was 5.4% and the shares traded in a range of a premium of 0.3% to a discount of 17.4%. The discount stood at 1.9% as at 27 March 2024, being the latest practicable date.

This is the first report since the company was appointed as preferred vehicle for the rollover of abrdn Japan Investment Trust (AJIT) and Atlantis Japan Growth Fund (AJG). The merger was completed on 10 October 2023 and added £118.4 million to the company’s net assets. NAVF received the assets in the form of cash and an in-specie transfer of the underlying investments of AJIT and AJG. 

Regarding the performance, chair, Rosemary Morgan commented:

“Global markets ended the year strongly, as investors had more confidence that inflation had been brought under control, a recession would be averted and that interest rates were at or near their peak. A return to modest inflation in Japan after years of embedded deflation has been seen as positive and the Nikkei 225 index recently reached its highest levels since 1989 in yen terms. However, the disappointment that the incoming Governor of the Bank of Japan would not immediately raise the target yield of Government Bonds contributed to yet more yen weakness. Our Investment Adviser, Rising Sun Management, does not normally hedge the currency exposure or seek to take active currency views, preferring to concentrate its efforts on identifying undervalued stocks and on engagement with corporate management rather than on macro-economic analysis.”

Regarding the outlook, she continued:

The company seeks to take advantage of the corporate governance reforms in Japan introduced over the past 15 years and we believe that an activist strategy will continue to generate superior returns compared to the broader market. The investment adviser has demonstrated an enviable ability to seize this opportunity, has achieved some notable successes within the existing portfolio and we are extremely pleased with the returns generated in 2023. We remain confident that the investment Adviser will continue to identify attractive new targets within a broader spectrum of the market capitalisation range and to continue to deliver significant returns for shareholders.

NAVF : Impressive returns for Nippon Active Value Fund

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