GLG Japan Equity

GLG Japan Equity is a long-short, market neutral strategy focused on Japanese equities. The investment team believes that Japan, which is largely under-covered and under-researched by market participants, is an environment that can offer alpha opportunities for fundamental managers.
 
  • The strategy’s aim is to deliver returns through a concentrated portfolio of liquid holdings with a mid-cap bias that is diversified across a variety of sectors within the Japan market.
  • The strategy is managed by Jeremy Reifer who has over 15 years of experience investing in the Japan long/short space and proven track record of generating returns at top tier funds.
  • Exposure to ‘specialist sectors’ (such as technology and healthcare) is limited as the team believes its analytical edge is in under-covered industries.
  • The lack of coverage by research analysts creates an opportunity for the team to form a differentiated fundamental view, based on meetings with extensive company contacts, investment experience, and local cross channel checks.

Approach

The strategy aims to generate returns on both the long and short side through a disciplined investment process:

  • Screening: A proprietary screening tools and a database of contacts accumulated during 15 years of investing in Japan are used to identify potential investment ideas in under-covered sectors.
  • Meetings: The portfolio manager spends about 8 weeks a year in Japan meeting with companies and take extensive steps to build a comprehensive investment thesis on each potential investment.
  • Research: As the investment idea continues to develop, the team uses proprietary earnings models to identify differences between their view and the consensus view. During this stage, follow up meetings with company management, sell-side analysts, and other primary sources will also take place.
  • Valuation: Building on their extensive research, the investment team calculates absolute and relative valuation attractiveness using a 6 factor valuation framework. The factors include: stock information, financials, valuation, investment thesis, risks and company/industry overview.
  • Construction: The portfolio is constructed with the highest conviction individual stock longs and shorts given the most weight. A sector, subsector framework is used to scan for and avoid significant factor exposure.
  • Risk: The strategy’s risk is primarily idiosyncratic risk (75%+ of portfolio risk attribution). The portfolio is reviewed daily in order to avoid ‘stale’ investment ideas and sizing. Gross exposures are adjusted with market volatility.

Unlike many competitors in this investment space, the strategy does not have a limited time horizon and does not aim to profit off of near term earnings trends and short term trading. Rather, it uses fundamental research to build a portfolio of high conviction stocks. Furthermore, the strategy is designed to identify alpha in a multitude of sectors, but with limited exposure to the ‘specialist’ sectors most competitors invest in. As such, the investment focus is not limited to traditional, large cap names – rather the team focuses on mid-cap stocks where coverage is limited and the inefficiencies are greater. By capitalising on duration differences (invest vs. trade), regional differences (local focus vs. global) and style differences (fundamental, intrinsic value analysis vs. market events), the strategy aims to generate superior returns over the long run versus competitors.

Approach Alternative
Asset Class Equity
Geographic Focus Japan

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