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It all started in 2012 with Shinzo Abe’s economic legacy, coined Abenomics. The first two arrows – monetary policy and increased government spending, were quick to implement while early signs of the third – economic structural reform – were starting to emerge. At AVI, it seemed the right time to seize the opportunity in Japan.

By the beginning of 2019 it was evident that the Corporate Governance Code was having a marked impact on the behaviour of companies and shareholders in Japan. Attitudes towards balance sheet efficiency, operating efficiency and shareholder returns were shifting. We began to see an increase in the quantum and success of shareholder activism. During the 2019 AGM season, a record 54 companies received shareholder proposals, 28% more than the previous year.

Private Equity joins the Party

This new shareholder activism in Japan came to the attention of private equity funds and by the end of 2019 large global private equity players were showing their enthusiasm for Japan. For some time, they had been aware of Japan’s abundance of excess balance sheet cash, potential for margin improvement, and cheap financing; however, the changing corporate governance environment was prompting renewed interest. KKR, Apollo, Blackstone, Bain, Carlyle and Permira had offices or were quickly opening offices in Japan.

This trend was encouraging especially as the type of companies AJOT held were ripe for acquisition. Companies with no debt, copious excess cash and consistent free cash flow generation. AJOT benefitted from its first takeover transaction when Nitto FC was taken private at a +38% premium by a private equity firm.

The Unexpected: COVID-19

The outbreak of COVID-19 and the related lockdowns led to a broad sell-off in global assets. There were few safe havens, and although Japan experienced a lower infection rate than Western countries, Japanese equities suffered, nonetheless. The severe economic shock from an unforeseen event like COVID-19 highlights the advantages of investing in resilient companies with solid balance sheets. While in the short-term factors might weigh on performance, we were confident that our companies were well positioned for a recovery.

The second quarter of 2020 saw a strong recovery in equity markets, as fears of a prolonged shutdown from the COVID-19 outbreak receded. However, 2020 was not an easy year for our strategy as it stifled our engagement activity and portfolio companies took a more cautious stance on reform. We proceeded, despite restrictions on travel, with our public campaign on Fujitec, a global manufacturer of elevators and escalators. We launched a website highlighting a multitude of issues ranging from low margins, poor shareholder returns to manufacturing inefficiencies.

Governmental and Regulatory Bodies on Side

Throughout this period the message from the governmental and regulatory bodies was clear – they will keep ratcheting up guidelines and regulation to ensure reform continues. The Financial Service Agency, METI (Ministry of Economy, Trade and Industry) and the TSE (Tokyo Stock Exchange) were seemingly aligned on supporting corporate reform and shareholder engagement. This pressure from

the government and regulatory bodies continued when the TSE announced that shares held by domestic banks and insurance companies would be excluded from its free float calculation. This was a direct attack on Japan’s allegiant shareholder problem and created more opportunity to engage with some of our portfolio companies on unwinding cross-shareholdings.

In 2020 PM Shinzo Abe resigned due to ill health, but his successors, Yoshihide Suga then Fumio Kishida in 2021, continued Abe’s reform agenda. The corporate reform arrow had already been launched and changes in politicians would not deter it.

By 2021 an updated Corporate Governance Code was released. The most salient points were the ones focused on independent directors with pertinent skills and the requirement for listed subsidiaries to oversee conflicts of interest. This scrutiny on listed subsidiaries was positive for AJOT as we had exposure to six listed subsidiaries at that time.

In 2023, the TSE followed through on their announcement calling on companies to address low valuations. This was mostly aimed at the 1,800 companies in Japan that trade on a price-to-book ratio of less than 1x. It was an encouraging step, highlighting that regulators are continuing to use their powers to promote reform. Then later in the year METI published its “Guidelines for Corporate Takeover”. The guidelines contained encouraging wording and we made our first tender offer to a portfolio company, seeking to take a minority stake. The option of putting forward tender offers won’t be an appropriate strategy for all our holdings, but we believe the environment has evolved in such a way that unsolicited tenders can now become a valuable tool to add to our engagement repertoire.

Engagement Campaigns

Looking back over the past five years, we launched 10 public campaigns and numerous more private engagement campaigns. We submitted 14 shareholder proposals, created 10 campaign webpages, wrote over 100 letters to managements and Boards and held nearly  500 meetings. The responses have for the most part been accepting, and increasingly so with companies becoming more aware of their responsibilities to shareholders.

Engagement TypeFive Year Engagement1# Portfolio Companies
Press releases107
As of 31/10/2023 | Source: AVI | Note: 1Five year period is from 31/10/2018 – 31/10/2023

The Carrot or the Stick

Although most of our engagement was private, our public campaigns helped to add pressure to both the companies being targeted and our other portfolio companies.  Overall, our public campaigns – which some might perceive as aggressive in their demands – have enabled us to deepen the relationship with our portfolio companies. We believe by focusing on a whole suite of issues, not just capital efficiency, and basing our arguments on the principles of the Corporate Governance Code, it has been harder for management to push back against our suggestions. The intent of our campaigns was to raise awareness of issues weighing on the share price, force management to discuss them, and encourage other shareholders to pressure management to rectify them.

The Macro Environment

We are optimistic about the macro environment in Japan. The weak Yen makes Japan highly cost-competitive, both for tourism and manufacturing.  Inflation has continued to creep higher having returned after a 30-year absence and with wage growth and increased spending, we see a more rational allocation of capital and improved productivity. This bodes well for the companies we invest in.  The Bank of Japan (BOJ) expansionary monetary policy over the past five years has weighed heavily on the Yen, which on an effective real exchange rate basis is at the cheapest since the early 70s. Even a small adjustment in monetary policy could lead to a stronger Yen. This could be a driver for attractive absolute returns.

Case Study: Challenges

SK Kaken, a manufacturer of construction coating paints, has been in the portfolio since inception, generating a return on investment of -23% with an IRR of -6%. Our proactive engagement with SK Kaken management has broadly focused on capital allocation and liquidity enhancement, corporate governance, and shareholder communications. AVI has consecutively submitted shareholder proposals at the three most recent AGMs. At the latest AGM, we sought to return the excess cash being hoarded on the balance sheet back to shareholders via dividends as well as the cancellation of treasury shares. We achieved majority support from minority shareholders; however, the resolutions were not passed due to the founding families significant ownership stake. 

More positively, despite the founding Fujii Family holding more than 40% of the votes, management recently completed a 5-for-1 stock split, have reduced director tenure, transitioned to a company with an audit & supervisory committee, increased board independence, and improved disclosure of ESG performance and quarterly results. Although we are pleased that management have implemented some of our suggestions, there is a long way to go with SK Kaken still trading on a derisory EV/EBIT multiple of 0.3x, compared to its peer group average of 8.4x. 

Case Study: Successes

Fujitec, an elevator installation and maintenance company, was a near five year holding since inception in October 2018, generating a return on investment of +111% and an IRR of +32%. We engaged extensively with Fujitec management on several areas, including operational improvements, capital allocation, corporate governance, and shareholder communications.

In early 2020, having been a shareholder for more than a year and having received a lacklustre response from management to the three letters we had sent thus far, our engagement turned public as we launched the AVI campaign website Taking Fujitec to the next level’. This prompted a more pragmatic response from management, as Fujitec announced its future strategic direction plan and later revised its Vision24 min-term plan after AVI threatened another public presentation and accompanying press release.

Overall, despite early resistance, management responded positively to our suggestions, announcing a share buyback program, reorganising the board to be majority independent, and providing full English translation of results. As a result, Fujitec’s EV/EBIT valuation multiple increased from 6x to 20x over our investment period. 


A famous Japanese proverb is an apt one, “fall seven times and stand up eight”. We can write numerous letters and presentations to management and boards of companies before receiving a positive response, but perseverance pays off. The environment has become more supportive for our approach, and we remain convinced that our strategy is effective.  The opportunity in our portfolio to outperform is impressive and we see the developments over the past five years as a strong tailwind to propel us forward.

This article was written by AVI Japan Opportunity Trust (AJOT)

Header image courtesy Kaichieh Chan via

Much has been reported in recent months of companies de-listing from the London Stock Exchange and de-camping to the US for better valuations of their businesses. And yet the UK has its champions and investors should perhaps consider the positives and buy more British.

One advantage for UK investors is that companies remaining listed in London are seen as cheap – and these are not companies which are doing badly – it is just that they are often under appreciated.

Alec Cutler, portfolio manager and head of multi-asset at Orbis Investments (pictured) says: “UK names keep popping up as being super cheap. We find that they’re good companies, they might need a tweak here or there, but they’re fantastic yet selling at very cheap prices. So they offer high dividend yields, high free cash flow yields, very solid book, and cheap book values.”

Examples, he highlights are Headlam, energy players Hunting, Drax and Balfour Beatty, the latter he says “one of the best positioned construction companies in the world, selling at a double-digit free cash flow yield, eight times earnings.

“The reason these companies are cheap is because of changes to  pension reform in the UK. UK pension holdings in UK equities went from approximately 50% around 1997 to 4% today, a massive outflow of money. And the current prices reflect the fact that investors around the world just don’t know these names as well as they should, and as well as we think they will.”

Examples of a company which wants to forgo its London listing and one which might like to list here, are Okyo Pharma and Coinbase, respectively.

Gabriele Cerrone, founder and chairman of biotechnology company Okyo Pharma, which specialises in eye disease treatment, is taking his company out of the UK and his issue is not so much valuation as appreciation.  Quoted in the Daily Mail he says UK investors are only interested in mining and oil giants – “What I learnt about trying to create a niche biotech company in the UK is that it is like trying to grow plants in the desert. It has been a complete waste of time and we never raised money from investment banks. There’s no biotech culture nor any liquidity in the United Kingdom at all.”

In its Notice of Intention to delist from the London Stock Exchange, Okyo said:The Company has decided to request the voluntary cancellation of listing as the volume of trading of the Ordinary Shares on the Main Market is negligible and does not justify the associated costs.’

Meanwhile crypto exchange Coinbase may not be averse to the idea of a London listing given dissatisfaction with the clarity of crypto regulation in the US.

Brian Armstrong, co-founder and chief executive officer of Coinbase told BBC Radio 4’s Today programme, when asked if he would have considered listing on the LSE rather than New York: “We started in the US so it was natural for us to list there but honestly given the UK has recently actually been quite positive on crypto, in a different world going back we may have considered it, to be honest at this point. I do think the US risks falling a little bit behind here if some of the regulators don’t engage further with the industry and create that clear regulatory environment that will remove some of these clouds.”

Then we have statistics from The Insolvency Service showing that the number of corporate insolvencies was 16% higher in March than in the same month last year.  Yes, there is a cost of living crisis but when we do spend and where are we spending? Not on these businesses, it seems.

One has to consider where, as investors we are focusing. Who does crypto currency investing benefit and who benefits from biotech investing? No one is suggesting one invests in the latter for philanthropic reasons alone – there are returns to be made after all. But is investing in something that can’t be seen, rather than in something that develops treatment for inflammatory eye diseases, somewhat myopic.

Stephanie Spicer is head of content at Quill PR

There are generalisations about women and investing: they are too hesitant, too risk averse, they have too many other calls on their finances, are not paid equally  … are they generalisations? Excuses? Actualities?

The Wisdom Council which worked with companies such as Scottish Widow, St James’ Place and Vitality to attempt to tackle the gender pensions gap claims Women have simply never considered investing – even when they are part of a pension scheme, they don’t think of themselves as investors (75% of those polled didn’t know they were investors, even though the recruitment criteria included involvement in a workplace pension). 

While auto enrolment may mean more people have access to pension saving and investments a key part of the advantage is missing if there is no active investment involved – which it won’t be if these women actually invested in pensions don’t recognise themselves as investors.

The Wisdom Council’s Yes She Can campaign research showed that the average woman’s pension pot is one fifth of the average man’s pension and at current rates, it will take 100 to 250 years to address the gap. Additionally 49% of women had never invested and, of those, 85% didn’t think investing was ‘for people like them’.

The statistics run on. According to the Fawcett Society women took home on average £564 less per month than men in 2022 (£536 in 2021) and possible because of or exacerbated by the cost of living crisis 53% of women would use the additional money to turn on heating and lights more often, and 48% report that their mental health would improve. For many the prospects of improving things are not overwhelmingly positive as 35% of women want to work but are prevented by reasons including a lack of flexible working options and affordable childcare.

Fidelity has for years research and campaigned on women and money. Its most recent research shows that while women are passionate about tackling societal and environmental issues, with 57% wanting to take action against climate change, 40% want to improve poverty and homelessness and 34% would like to influence positive change towards animal welfare, many are unaware of ‘the positive impact they could have through their pensions and investments, with 68% unfamiliar with Environmental, Social and Governance (ESG) investing. 

This is all somewhat depressing and rather makes us women look a bit silly.

But not really when one considers Fidelity research into the ‘gender pay rise gap’, which based on ONS data shows that taking the average salary for a 25 year old women was £25,066 and for men £37,817. Were those salaries to rise by 1% in real terms each year the average pay rise every five years would be £1,284 for women and £2,017 for men. Salaries at retirement would be £49,682 for women and £75,748 for men. The respective pensions at retirement, assuming an 8% salary contribution would be £276,403 and £419,006 – a difference of £142,603. That’s a lot less available to spend on heating, lighting or childcare, on climate change, improving poverty and homelessness and animal welfare.

And of course, these issues impact on all of us, on all our worlds, male or female. Which makes us all look a bit silly. And it leaves the investment industry with a job still to do to attract more investors.

Stephanie Spicer is head of content at Quill PR

When Luiz Inacio Lula da Silva won the Brazilian presidential election there were high hopes that he would address the issue of the destruction of the Amazon rainforest, preferably to halt it.

It is hard to get one’s head round the extent of the destruction of the rainforest.

According to the Brazilian Space Research Institute (INPE), 1,455 square kilometres (562 square miles) of rainforest were destroyed in September 2022 – an area almost twice the size of New York City. The previous record was for September 2019 when 1,454 km2 were destroyed.

So COP27 in Egypt coming so soon after the Election presented a perfect time for Lula da Silva to honour the commitment Brazil had made to end deforestation by 2030.

And he appeared to be on track to do that.

Lula da Silva told delegates he would end the illegal deforestation and went so far as to say he was to ask the United Nations to host the COP30 summit in 2025 in the Amazon rainforest.

According to the Financial Times Lula da Silva said: “It’s important for it to be in the Amazon. It’s important for the people who defend the Amazon to get to know what the region is. We will fight hard against illegal deforestation. We will take care of indigenous people.”

“This devastation [of the Amazon] will be a thing of the past. The crimes that happened during the current government will now be combated,” Lula said, “We will rebuild our enforcement capabilities and monitoring systems that were dismantled during the past four years.”

It is to be hoped that the news will encourage other countries to help and re-visit for example, The Amazon Fund – a forest preservation alliance set up to raise donations for non-reimbursable investments to prevent, monitor and combat deforestation and promote the preservation and sustainable use in the Brazilian Amazon.

At COP27 Germany and Norway indicated they were willing to restart payments to the fund which had been halted in 2019 due to the attitude of the then Brazilian Bolsonaro government.

It is not just the Amazon rainforest that needs protecting; encouragingly COP27 had news on other fronts. The European Union (EU) announced a 25.5 million euro investment in the protection and sustainable use of the Five Great Forests of Mesoamerica, which range from Mexico through Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama, covering an area of over 120,000 square kilometres.

Here in the UK, we would be wise not to rest too much on our laurels. According to the Woodland Trust: ‘Irreplaceable ancient woods continue to be lost and damaged by house building, new roads and railways. Over 1,225 ancient woods across the UK are under threat from development while during the last 21 years at least 981 have been permanently lost or damaged. More insidious threats facing woods and trees include unseen reactive nitrogen air pollution from agriculture which strips trees of their layer of protective lichens and causes a fertiliser effect where grasses out-compete more delicate woodland flowers. This disrupts woodland ecosystems in ways we are only beginning to understand.’

The State of Nature 2019 report showed that “the abundance and distribution of the UK’s species has, on average, declined since 1970 and many metrics suggest this decline has continued in the most recent decade. There has been no let-up in the net loss of nature in the UK.” Key pressures on the UK’s biodiversity were found to be agricultural management; climate change; pollution and urbanisation (among others).

Here – and globally there are steps being taken to address the threat to biodiversity, including the imminent UN biodiversity conference COP15, belatedly taking place in Montreal in December, the theme of which is “Ecological Civilization: Building a Shared Future for All Life on Earth”.

There are other initiatives such as the Partnership for Biodiversity Accounting Financials (PBAF) which are helping the financial industry to “transparently assess and disclose their impact and dependency on biodiversity”. Currently it numbers 40 financial institutions (including some of our clients) with assets over $9trn. The independent foundation, based in the Netherlands notes that: “Through their investments, financial institutions can play an important role in the conservation and sustainable use of biodiversity, contributing not only to the biodiversity targets of the Convention on Biological Diversity (CBD), but also to the reduction of investment risks. For financial institutions to take up this role, the availability of science based, reliable data on the impacts on biodiversity is an important precondition.”

It might not take long to fell swathes of forests and woodland, but it will for new ones planted to grow. And what will be lost while generations wait for that to happen?

What are the main topics of conversation on my commute into London? The horrors in the Ukraine, inflation, party-gate? No, none of these; it is which days people are working in the office, which at home and how they are adjusting to the ‘new new normal’. Is the four day week inevitable?

Businesses all over the country have reacted very differently to the post-pandemic world of work.  Some like the large City banks are mandating staff to revert to the full pre-pandemic Monday to Friday working regime, whilst others are taking a rather more flexible and pragmatic approach.

Of course, there are many more issues at stake here than merely hours in the office.  Whilst many staff have enjoyed the working from home experience, others have not, missing the buzz and camaraderie of an office environment. 

One thing is for certain, the adoption of Zoom and Teams meetings during Covid-19 means that those meeting mediums are here to stay, leading to much greater time efficiencies and lower travel costs and an end to the often travel-related stress.  

Going forward, an organisation’s WFH policy is going to be a significant factor in both retaining and attracting new talent and – if not already explicit in the job ad – is  likely to be right up there in the interviewee’s top three questions. A busy time for all HR departments for sure.

How companies react depends very much on the type of business they are in or whether they feel they can trust their employees not to abuse a much more flexible and self-empowering approach to the working week.  Client facing service sector businesses clearly need to ensure quality of service is maintained but balance this against the risk of wholesale resignations should they revert to a zero flexible working policy.

Some firms are taking quite a radical approach, with PwC, for example, announcing that its 22,000 staff can finish at Friday lunchtime over the summer.  Others may follow and this will almost certainly be the precursor to the official four day working week that many have been calling for to create ‘positive well-being’ and a better work life balance.

Image credit: Isabel Andrade on Unsplash

Now the ISA season is over, is that it for clients investing into their ISA pots till next year? Does the flurry of activity pre-5 April to encourage investors to use their ISA allowance before they lose it? Does it risk savers missing out on the opportunities presented by pensions?

And will any manage to save anything anyway for the foreseeable future?

Providers and advisers have a role to play in encouraging them to and in promoting pensions as much as ISAs. The two should go hand in hand.

But it is not going to be easy.

Many people lost their jobs as a result of the pandemic and the age-old (excuse the expression) scandal of the over fifties being overlooked for jobs is still evident.

And of course, the effects of the pandemic lockdown on the economy has been superseded by Russia embarking on a war with Ukraine.

Cost of living rises

The Office for Budget Responsibility (OBR) heralds worse to come for the consumer.

‘The conflict also has major repercussions for the global economy, whose recovery from the worst of the pandemic was already being buffeted by Omicron, supply bottlenecks, and rising inflation,’ it says. ‘A fortnight into the invasion, gas and oil prices peaked over 200 and 50% above their end-2021 levels respectively. Prices have since fallen back but remain well above historical averages.

‘As a net energy importer with a high degree of dependence on gas and oil to meet its energy needs, higher global energy prices will weigh heavily on a UK economy that has only just recovered its pre-pandemic level. Petrol prices are already up a fifth since our October forecast and household energy bills are set to jump by 54% in April.’

The OBR predicts that if wholesale energy prices remain as high as markets expect, energy bills are set to rise around another 40% in October, pushing inflation to a 40-year high of 8.7% in the fourth quarter of 2022.

As it points out: ‘Higher inflation will erode real incomes and consumption, cutting GDP growth this year from 6.0 per cent in our October forecast to 3.8 per cent. With inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2 per cent in 2022-23 – the largest financial year fall on record – and not recover their pre-pandemic level until 2024-25.’

Compound interest

It is imperative individuals save and invest where they can and as much as they can and as early as they can. As Dan Brocklebank, director UK, Orbis Investments has recently highlighted, the majority of people underestimate the power of compounding interest. Orbis carried out research asking folk if they invested £100 on a child’s behalf into the stock market via a Junior ISA, assuming 8% return pa what would they have when the child hit 18. Only 6.6% were able to calculate near the correct amount of £400. The average ‘guesstimate’ was £246. This shows a clear need for financial service providers to educate clients – and potential clients – about the power of compounding over longer terms.

Dan said: “Compound growth may not be intuitive to most. As long as people underestimate the power of compounding, they are likely to miss out on the long-term benefits of investing in markets.  Investing in global equities has been shown to outperform cash over the long term, and the ‘magic’ of compounding plays a part in this.”

The award is particularly appreciated as it is voted for exclusively by financial journalists.

In presenting the award, the judges said: “Congratulations to Quill PR, which returns to claim the title that it held in 2017 and then again in 2018. As with all our PR and communications awards, it was the financial journalist community that had the final say in determining boutique PR agency Quill PR as the winner, with the outcome decided by an extensive poll carried out in April 2021.”

The judgement advised that recognition was given to Quill PR as a “longstanding and quality agency, with a diverse client base”. In the initial round of judging, the agency was complimented on providing “good examples of strong relationship building during lockdown”, with praise for their client wins during a difficult year.

The judges concluded: “Quill PR scoops this award for its work for both new and existing clients across the year.”

Sam Emery, managing director of Quill said: “We are delighted to win this award, especially as it is voted for by the press with whom we work so closely. 2020 and 2021 could have proved overwhelming in more ways than one. However, the Quill PR team more than punched above its weight, remaining a go-to source for press seeking quality comments and interviews and also as a trusted partner to our clients.”

Quill PR is pleased to announce a new member to the team, with the hire of Stephanie Spicer as Head of Content.

Steph has worked as a personal finance and investment journalist for over 20 years. She has held senior editorial positions on various industry titles. These include Money Management, Investment Week, Cover and Corporate Adviser. Most recently she has freelanced for What Investment Magazine and What Investment online. She has also acted as a PR consultant for the best part of two decades.

Sam Emery, Quill Managing Director, said: “We are delighted to have Steph on board. Her role is to continue developing the content writing service Quill offers to clients. As our client base grows so does the need to fulfil clients’ requirements for quality copy and get clients’ messages out to their relevant audiences.”