| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.1% | 3.6% | 14.5% |
| 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| 14.5% | 10.8% | 14.5% | -8.2% | 0.7% |
The Japan Opportunities Fund returned 3.60% in Q4 2025, outperforming the TOPIX Index which returned 2.62%. Japanese equities rose as robust corporate results and new Prime Minister Takaichi's pro-growth policies boosted the benchmark to an all-time high. Leading contributors were construction firm Shimizu, which showed continued margin improvements and maintained optimistic guidance amid higher capex, and e-commerce firm Mercari, which reported robust results driven by GMV recovery and US business turnaround. Detractors included industrial gas company Nippon Sanso, which faced sluggish demand due to macro uncertainty, and Sony due to profit-taking. The fund initiated a position in Chugai Pharmaceutical, attracted by core product growth and underestimated royalty potential from its weight-loss pill licensed to Eli Lilly. Key themes include persistent inflation feeding through to corporate earnings, artificial intelligence opportunities expanding beyond high-volatility stocks, and improving corporate governance driving capital efficiency. While near-term volatility may persist, the manager remains confident in the long-term structural outlook for Japan given attractive valuations and strong fundamentals.
The fund focuses on undervalued, cash-generative and capital-efficient Japanese businesses that can create value for investors through rigorous fundamental research and strict valuation discipline.
We think volatility could remain high in the short term, so we are focused on the quality of management teams and businesses to help us navigate and capitalise on changes. We believe Prime Minister Takaichi could bring much-needed stability and predictability, which we expect to be positive for the equity market. The long-term structural outlook for Japan remains compelling with attractive valuations and strong corporate fundamentals.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 16 2026 | 2025 Q4 | 1803.T, 4091.T, 4385.T, 4519.T, 6141.T, 6758.T | AI, Construction, Corporate Governance, E-Commerce, inflation, Japan, Pharmaceuticals | - | Artificial intelligence remains a global investment theme and Japan is no exception. Investor interest has largely focused on high-volatility stocks, although there has been a broader search for quality AI beneficiaries. This shift has expanded the opportunity set, allowing the fund to add positions in attractively valued, high-quality companies aligned with the theme. Inflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. The continued improvement in corporate governance and shareholder value is a tailwind for Japanese equities. A revision of the Corporate Governance Code is expected to address corporates' hoarding of cash, which should enhance capital efficiency and ultimately lead to higher dividends and share buybacks. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
BuybacksShare repurchases in 2024 and 2025 hit consecutive records as companies raced to meet Tokyo Stock Exchange capital efficiency mandates. Buybacks were a primary driver of the market's 20% climb in the first half of FY2025. |
Share Repurchases Capital Efficiency TSE Mandates Shareholder Returns Records | |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| 1803.T | Construction firm Shimizu reported strong operating income in its first-half results as the company continued to show margin improvements. Shimizu had a healthy order book and maintained its optimistic full-year guidance (forecast) amid higher corporate and government capital expenditure (capex). |
| 4091.T | Shares in Nippon Sanso, an industrial gas company, fell after the company reported weaker quarterly results. It provided a cautious full-year guidance, as the industry faced sluggish demand due to macroeconomic and geopolitical uncertainty. |
| 4385.T | Shares in e-commerce firm Mercari rose after the company reported robust quarterly results, driven by a recovery in its gross merchandise value (GMV) growth rate and a turnaround in its US business. |
| 4519.T | During the quarter we initiated a position in Chugai Pharmaceutical, which is majority owned by Roche. We like the continued sales growth of its core products, and we think the market had underestimated the potential royalty payments for Orforglipron, a weight-loss pill which Chugai has licensed to Eli Lilly. |
| 6141.T | We exited the position in DMG Mori, Japan's largest machine tool company, after the company issued a severe profit warning. |
| 6758.T | Sony |
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