Comgest Growth Japan
Comgest Growth Japan is a concentrated portfolio of only 30-40 high quality long-term growth companies that are either head-quartered, or carrying out their predominant activities, in Japan. Each holding has been bought with a three to five year outlook. The managers believe that Japan is full of under-researched companies with great capital discipline, barriers to entry and growth. Their mission is to find them.
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Richard Kaye, based in Tokyo, joined Comgest in 2009 as an Analyst and Portfolio Manager specializing in Japanese equities. He co-leads Comgest’s Japan equity strategy and is a member of the Comgest Group's Investment Committee. Richard began his career in 1994 with the Industrial Bank of Japan, later joining Merrill Lynch in 1996. He moved to Wellington Management Company in Boston in 2005 as a Portfolio Manager for Japanese TMT stocks. Richard graduated from Oxford University with a major in Oriental Studies.
Chantana Ward has been with Comgest since 1999, specializing in Japanese equities as an Analyst and Portfolio Manager. She also serves as a non-executive member of the Board of Partners. Chantana co-leads Comgest’s Asia ex-Japan, Asia including Japan, and Japanese equity strategies, contributing significantly to their development. Based in Paris, she frequently travels to Japan for research and team collaboration. She holds an MSc in Finance from Baruch College’s Zicklin School of Business and a dual diploma from The American University of Paris.
Makoto Egami joined Comgest in 2013 and is a Tokyo-based Analyst and Portfolio Manager specializing in Japanese equities. He began his career in 2001 at JP Morgan Chase in Tokyo as a credit analyst and later worked at Taiyo Pacific Partners and Macquarie, focusing on Japanese small and mid-cap stocks. Makoto also served as a senior industry analyst at Google Japan. He holds a BA in Economics from Keio University, an MBA from the Kellogg School of Management, and the CMA from the Securities Analysts Association of Japan.
Richard Kaye, based in Tokyo, joined Comgest in 2009 as an Analyst and Portfolio Manager specializing in Japanese equities. He co-leads Comgest’s Japan equity strategy and is a member of the Comgest Group's Investment Committee. Richard began his career in 1994 with the Industrial Bank of Japan, later joining Merrill Lynch in 1996. He moved to Wellington Management Company in Boston in 2005 as a Portfolio Manager for Japanese TMT stocks. Richard graduated from Oxford University with a major in Oriental Studies.
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Company Description
Comgest was founded in 1985 and is entirely owned by its employees through a partnership structure. Equity is not restricted to senior managers and the company is proud that approximately 75% of Comgest employees are shareholders. Comgest is set up to do one thing – manage quality growth equity portfolios for the long-term. In this, it has been extremely successful and it now runs around $30 billion of assets. All Comgest funds have the same philosophy and process, which is applied to different parts of the world and each one is high conviction and concentrated, unconstrained by any benchmark. Comgest believes continuity - of their team, style and approach - is its greatest asset. Comgest was awarded the Elite Provider for Equities rating in 2019, 2020 and 2021.
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Quote from the Fund Manager
You can spend half your life in a country and still find something new every day; that’s how Japan investing feels for us, a set of world-leading companies waiting to be discovered.
Richard Kaye
Co-Manager
Investment process
In line with the broader Comgest business, Comgest Growth Japan invests in high quality, long-term growth companies. The team believes that markets fail to correctly price a company’s sustainable competitive advantage, which should help it generate above average earnings growth. In order to find these companies, the team will perform fundamental research, with the goal to obtain a better understanding of the stock than the wider market.
To find these companies, the managers look for six factors to determine quality. These are the business model, financial criteria, organic growth, barriers to entry, sustainability of the business and quality of management.
They will then search for certain desirable criteria that will demonstrate quality characteristics, such as strong earnings growth, high levels of returns and solid cash flows. They will want to identify businesses with strong competitive advantages, high barriers to entry to new entrants, and earnings visibility.
This reduces the universe down to around 150 investment candidates, from which they will perform more detailed analysis. This will include a review of the financial statements and production of a five year earnings forecast, as well as verifying this analysis in meetings with corporate management, competitors, customers and suppliers. The decision as to whether to proceed with an investment needs to be unanimous. At this point, stocks are valued with a five-year conservative outlook.
The final portfolio will consist of 30-40 stocks. Positions are sized between 1%-5%, with an average of around 3%. This is based on a view of current valuation, the growth opportunity and the visibility of success. The average holding period is between three and five years, but is often longer as their businesses continue to outperform.
Risk
Risk analysis is integrated into each part of the process. During the fundamental analysis, the managers will identify the impact of the additional stock selection on the overall portfolio. They look for diversification on multiple levels, including in individual stocks and for exposures to certain geographies, business activities, markets and currencies. There are no hard limits on sector allocations or geographic regions. The team heads and CIO monitor portfolio construction and performance deviation from the benchmark to assess relative risk. The process is naturally risk averse as all managers are shareholders of the wider company and are therefore acutely aligned with investor outcomes.
ESG
ESG - Integrated
Comgest considers ESG issues as integral to the investment process, with each of the Environment, Social and Governance elements all given equal importance when performing stock analysis - from discovery to decision making. The managers look for companies exhibiting sustainable growth characteristics, which leads them to assess many non-financial criteria as part of their research process, such as corporate culture, governance structure, innovation, stakeholder relationships, environmental impact and policies. They then assess each company using their in-house ESG assessment tool, resulting in a rating from 1-4 (1 being an ESG leader, 4 being a laggard where they have identified need for improvement). This rating then impacts the discount rate they use in their proprietary valuation models. As impacting the discount rate leads to greater or lesser upside for the stock, ESG is hardwired into portfolio construction and the decision-making process.
The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.