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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Driven by strong earnings from Recruit Holdings and OBIC Business Consultants, while initiating a position in Kioxia and exiting Disco to rebalance AI supply chain exposure."
During the third quarter of 2026, the Japan Opportunities Fund returned 5.13% net of fees, underperforming the benchmark TOPIX Index return of 7.26% net and slightly trailing the IA Japan Equity peer group return of 5.18% net. On a year-to-date basis, the fund delivered 28.14% net of fees versus 24.29% for the benchmark index. The fund continues to operate with an active, concentrated mandate invested in cash-generative Japanese equities, balancing high-conviction structural technology exposures with capital discipline amidst rising equity market volatility. The manager highlights an evolving macroeconomic regime characterized by entrenched domestic inflation, real wage gains, and a hawkish Bank of Japan that lifted its policy rate by 25 basis points to a 31-year high of 1.25%. This rate normalization has supported domestic demand while lifting earnings for financials and insurers. Structural governance reforms, underpinned by revisions to the Corporate Governance Code and the Companies Act, remain a principal structural tailwind expected to enhance returns on equity and drive corporate multiple expansion. Portfolio activity reflected selective reallocation across the technology supply chain. Human resource platform Recruit Holdings and enterprise software provider OBIC Business Consultants were the leading quarterly contributors, buoyed by AI adoption and margin expansion. While hardware names including Murata Manufacturing, Tokyo Ohka Kogyo, and Tokyo Electron faced short-term detraction, the fund initiated a position in NAND flash producer Kioxia at an attractive valuation while exiting semiconductor toolmaker Disco to diversify exposure.
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