Salient to Investors:

Max Gottschalk at Gottex Fund Mgmt said:

  • His largest Asia fund’s bets on small Japanese companies have been cut and the fund now allocates 2/3 of its Japan investments with managers that focus on large companies.
  • A big part of the rally in Japanese equities has been in small to mid-caps, which have more risk on the downside, but does not plan to reduce his Japan investments significantly.
  • The Japanese economy is improving and real changes seem to be taking place, with large corporations  like Sony considering making dramatic changes to their corporate structure, unleashing value.
  • Earlier inflows into Japanese equities were dominated by individuals and foreign investors, but the next wave will be driven by Japanese institutions shifting from bonds to more risky assets. The BOJ’s unprecedented QE will provide a floor for the prices of government bonds, enabling Japanese institutions to make the switch.

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