Japanese Small Cap Equity Strategy Introduction to the Characteristics and Investment Process June 2013
Portfolio Manager of the Strategy Hiromitsu Daimon, CMA, CIIA, Senior Portfolio Manager 2013 Team Leader of Japan Small Cap Team (from July 1st) 2006 Senior Portfolio Manager 2003 Portfolio Manager, Small/Mid Cap Investment Trust Team, Equity Investment Dept. 2001 Portfolio Manager, Institutional Clients Investment Dept. 1996 Analyst, Corporate Research Dept. 1994 Trader, Equity Trading Dept 1992 Joined NAM, Assistant Marketing Executive, Product Services Dept. 2009 MBA, Hitotsubashi University 1992 B.A. in Economics, Chuo University Source: NAM Tokyo as of June 2013 1
Supporting Portfolio Manager of the Strategy Makoto Ito, CMA, Portfolio Manager 2008 Portfolio Manager, Equity Investment Dept. 2006 Analyst, Corporate Research Dept., Nomura Asset Management Co., Ltd. 2002 M.S. in Science, Tokyo University Joined Mitsubishi UFJ Asset Management Co., Ltd. (predecessor UFJ Partners Asset Management Co., Ltd.) Source: NAM Tokyo as of June 2013 2
Our Philosophy The markets are not fully efficient The Japanese small equity market is especially inefficient because The lack of sell-side coverage. So little information is available. Only so much research is done by investors Valuation anomalies exist and can be exploited through active management 3
Our Approach To combine Quantitative and Qualitative Assessment, through a bottom up approach Perform extensive fundamental research to identify stocks which hold potential Focus on fundamental strength and improvement potential Examples: Niche top, Greater market share, Premium redemption to shareholders, or Growth, etc. 4
Investment Process ( Outline ) Investment Universe Around 3400 stocks Mainly,Russell/Nomura Small Cap 1100 Screening Quantitative Approach (by Value Indicators) Universe 1 500-600 stocks Universe 2 100 200 stocks PER, PBR, PCFR, etc. Fundamental Research done from Financial analysis & Company Visits Niche top Greater market share Premium redemption to shareholders, Growth, etc. Portfolio Adjustment on Exposure by Expected return & conviction, Liquidity, or Macro/Market Environment, etc. 5
Investment Process (Step 1) Universe 1 Investment Universe is Around 3400 stocks Mainly, Russell/Nomura Small Cap 1100 Quantitative Screening by Value Indicators P/B ratio OR P/E ratio OR PCFR OR Dividend Yield OR EV/EBITDA Combined Universe Universe 1 500-600 stocks 6
Investment Process (Step 2) Universe 2 Universe 1 500-600 stocks Fundamental Research (Financial analysis & Company Visits) Greater market share Niche top How Shareholder Value is provided moreover Growth etc. Realize Shareholder Value Universe 2 100 200 stocks 7
Investment Process (Step 3) Portfolio Universe 2 100 200 stocks Exposure Liquidity Expected return and conviction or Macro and Market Environment Optimizing Portfolio 8
Research Staff - Equity Research / Japan Name Title Years of Experience Investment and Research with NAM Yasukazu Nakaguma, CMA Managing Director 26 15 Sector Analyst MATERIAL TEAM (3) Mitsuhiro Kimura, CMA Senior Analyst 21 22 Tsuyoshi Taniguchi Senior Analyst 19 11 Akio Ohata, CMA Senior Analyst 15 8 ASSEMBLY TEAM (6) Shigeru Aiba, CMA Senior Analyst 26 14 Mitsuhiro Iso, CMA Senior Analyst 12 10 Yoshinori Eguchi, CMA Senior Analyst 14 9 Toshihisa Gamou, CMA Analyst 8 9 Kosuke Shiotsuki, CMA Assistant Analyst 2 5 Yunfei Zheng Assistant Analyst 1 1 CONSUMER TEAM (5) Eiji Ko, CMA Senior Analyst 19 21 Yoshiyuki Inagaki, CMA Senior Analyst 27 15 Kohei Oba, CMA Analyst 7 2 Yuta Amaike, CMA, CFA Assistant Analyst 6 6 Ying Lu, CMA Assistant Analyst 4 4 Name Title Years of Experience Investment and Research with NAM INFRASTRUCTURE TEAM (4) Hideichiro Nishimura, CMA Senior Analyst 23 15 Makoto Murahashi Senior Analyst 23 6 Hidetsugu Hara, CMA Senior Analyst 17 9 Eiji Sakimura, CMA Analyst 12 6 Small-cap Analyst SMALL-CAP TEAM (3) Tomohiko Kinugawa, CMA Senior Analyst 25 17 Yuta Sakurai, CMA Senior Analyst 18 <1 Go Tabata, CMA Senior Analyst 15 13 Corporate Governance Specialist Hideaki Takamoto, CMA Senior Analyst 16 20 Naoki Iwata, CMA Senior Analyst 31 17 Yoshitsugu Tanaka, CMA Analyst 10 12 Tomoko Yamaguchi, CMA Assistant Analyst 3 22 As of April 1, 2013 not be copied, re-distributed or reproduced in whole or in part without the prior written approval of Nomura Asset Management Co., Ltd. 9