1. When
did you start your ESG equity fund? What is the focus of Capital Asset Management,
and how have you raised assets under management?
The CAM ESG Japan Fund was created on 27
January 2017, with zero seed money. Right upon inception high net worth
individuals recognized its concept & potential, and the fund got immediate
funding of US$2Million. In less than 365 days the fund has grown over 300%
and with current AUM of over US$7Million+ and growing.
Capital Asset Management K.K. (CAM) business invests on
behalf of our clients with expertise predominantly in both Frontier Asian and
Emerging Markets. Unlike any other investment firm in Japan, we created and
pioneered the first CAM ESG Japan Fund (Equity Mutual Fund). We invest on
behalf of our various clients who entrust their savings to us. We
recognize the change in landscape where non-financial information is becoming
more strategically important than the traditional financial ratios.
CAM (Capital Asset Management K.K.) was founded in Tokyo in 2004, and is currently headed by Eiichiro Tabuchi. We have around 20 unique funds, from a Yield Oriented Health Care REIT Fund to a Frontier Markets Country Fund. As of December 2017 CAM had approximately US$380Million in total AUM (Assets Under Management).
2. Where
do you see the opportunity for your firm to grow? Is there any key ESG
advantage you have today in Japan or Asia?
Given
that CAM is a boutique asset manager and our funds are purely unique. It would
be fair to say that we are almost an exclusive player for both frontier markets
and our ESG fund in Japan.
To
elaborate; our ESG fund has an annualized return of 28% with a sharpe ratio of
3.1. Further we have created a customized ESG Alpha Strategy Fund that
incorporates various hedging strategies, based on investors investment
objectives, risk appetite and target return profile. This fund can be fully
hedged and has the ability to deliver a
reasonable rate of return within an acceptable scope of risk to our client’s
advantage.
In
the summer of 2017, Japan’s Government Pension Investment Fund (GPIF) the
largest investor in the world, with AUM of US$1.5 Trillion, selected 3 ESG
indices as their benchmark. They allocated US$10Billion for preliminary ESG
investment. This act of responsible investing will be followed by the
respective public sector pension funds, corporate pension funds, and general
public the private investors.
3. How
do you create such impressive returns? What is your universe and how to do you determine
your portfolio holdings?
The
return on our ESG funds is driven by what we call “CAM Sustainable Investment
Model” which basically is an integration of combining ESG Score and company’s financial
data.
To
define; we take the total universe of 3,700 listed companies of Japan. Selecting
the top 1,000 companies with ESG criteria, we then do a quantitative analysis
and a deep drill for the top 100 ESG companies, eliminating the companies that have
the highest potential as "bad actors" or being involved in major
scandals in Japan.
The
ESG fund has a total of 100 companies (40 from Nikkei 225, and the rest from
TOPIX). We do not disclose exact criteria for our profitable filtering system
as this remains our in-house intellectual property and trade secret.
4. What
attracted you to this opportunity to pursue research and then run an ESG fund
of corporates in Japan?
I
started as Portfolio Risk Consultant in MSCI BARRA, guiding the investment
professional in Japan on importance of BETA and diversification through
Multiple Factors Risk Model. Moving to Thomson Reuters, I explored the world of
ALPHA through work on quantitative analysis, Smart Beta Indices, and set up a Lipper
Fund awards for” Japan’s Defined Contribution Category” which has focus for
Risk/Return for long term investment.
As
for setting up the ESG Fund, my research with ESG content conclude that
investing in ESG excellent companies help REDUCE RISK. At the same time the
better Governance within those firms lead them towards better performances
which convert into HIGHER RETURN.
Peer
analysis shows that my approach provides better result, which the management of
the firm believes that CAM should introduce the product to the public, and
allow them to gain the benefit of ESG investment for long run investment.
Further it could be said that the non-financial factors have become more
important in corporate analysis; as this is what I know to be the main ESG
factors.
5. Will
the corporate governance issues of Japanese enterprises impact the CAM ESG
Japan Fund?
The
biggest surprise with our first year results came from the impacts of more
Japanese corporate scandals than expected. We only factored in 1 or 2 major
scandals per year, however in 2017, we experienced 9 in Japan; Toshiba, Nissan Motor,
Subaru, Mitsubishi Material, Kobe Steel and the 4 largest construction companies. Let’s
hope that we continue to perform at a similar during scandals in 2018. The CAM ESG Japan Fund will not be impacted as we search for alpha within our portfolio via deep drill down quantitative
research. We have strong insights from our ESG analysts.
6. Are there
project partners or investors that you are searching for at this time for your
ESG fund product offered in Japan?
CAM ESG Japan Fund is a regular investment trust developed under
supervision of Japan’s FSA. We believe it will be good if the ESG Investment
can be made available to wider audience including investors outside Japan.
We are currently looking for partners who can help introduce the
variants of CAM ESG Japan Fund within their local jurisdictions.
7. Where do you
see your firm growing the most in the next 2-3 years? Will this continue the
current focus or change into another new direction?
CAM ESG Japan Fund has 5 years of simulation performance
result, and 1 year of actual result (28% returns). Since we have been able to confirm
that the actual performance is replicating the result from simulation (between
2012-2016), we are convinced that the current ESG investment process is very
solid and it can be used as base for Absolute Return product (ESG Alpha
Strategy). We believe that our ESG Alpha derivative products will also become our
focus in the next 2-3 years.
If
any Japanese or global investors are interested in knowing more track record details about
our ESG fund performance, they can contact Nofil Iqbal in English or Japanese for all distribution and marketing enquiries. 英語または日本語の電子メールは受け入れられます。 He can be contacted on LinkedIn or by email at n.iqbal@capital-am.co.jp Full profiles of Capital Asset Management K.K., Franklin Khusman, and Nofil Iqbal, are all available on LinkedIn.
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