Strategy Overview
Asuka Value-Up Value Co-Creation Fund (Qualified Institutional Investors Only） is a daily-liquid domestic private investment trust that leverages Asuka Corporate Advisory’s engagement strategy expertise, honed over more than 20 years of focus on Japan’s small-to-mid cap equity market.
It concentrates investments in approximately 20 companies, primarily targeting listed Japanese small-to-mid cap market capitalization firms through an engagement-centered approach. The core philosophy of the investment strategy is not confrontation but co-creation.
We pursue “co-creative engagement” where companies, asset owners, and investors sincerely engage with each other from a medium-to-long-term perspective, jointly create value, share it with society, and bring it to fruition as tangible results.
Philosophy (Investment Philosophy / Vision for This Fund)
The fundamental philosophy of this fund is to transform challenges in Japan’s capital market into investment opportunities through “co-creative” engagement.
Long-standing Contribution to Japan’s Small and Mid-Cap Market: This fund is managed based on the advice of Asuka Corporate Advisory, which has pioneered investor engagement in Japan’s small and mid-cap stock market for over 20 years.
“ValueUp” and “Co-creation”: The fund aims to enhance corporate value and maximize returns for investors through its unique engagement activity called “ValueUp” for investee companies. The core idea behind this activity is “co-creation” rather than “confrontation” with companies.
Future Envisioned by Co-creative Engagement: The fund pledges to engage in “co-creative engagement” where companies, asset owners, and investors earnestly face each other from a medium-to-long-term perspective, jointly create value, share it with society, and realize it as results. It is believed that beyond this lies a new future for Japan, as envisioned by another meaning embedded in “Asuka”: “a fragrant tomorrow”.
Opportunity for Alpha Generation: The fund aims for long-term stable returns through an engagement-centric approach, focusing on small and mid-cap stocks with significant potential for unique alpha generation. This is based on the recognition that while small and mid-cap stocks offer high risk-return efficiency over the long term, many are left undervalued, and realizing their value is not easy due to individual company resources and market factors.
Our Investment Strategy (Investment Policy)
This fund’s investment strategy centers on value realization through an “engagement-centric approach”, deploying the following specific policies and activities.
Four Pillars of Value Realization through Engagement-Centric Approach:
- Construction of a Unique Portfolio: Companies are selected from a long-term perspective, evaluating their business viability and economic efficiency based on multi-layered engagement. The fund employs concentrated investment, with approximately 20 investee companies and a top 5 concentration of around 60%.
- Balancing Long-Term Investment and Trading Discipline: While predicated on long-term investment, fine-tuned trading is conducted through deep engagement with highly concentrated portfolio companies. Trading disciplines are also set to avoid a long bias.
- Enhancement of Investee Company Value: The fund promotes the growth of the investee company’s business value itself through strategy formulation, operational improvements, and other initiatives. Furthermore, it aims to close the gap between market share price and intrinsic value through improvements in governance and IR.
- Co-creative Engagement: Deep engagement that delves into real businesses that can drive stock prices is undertaken. The fund accelerates engagement with the collective power of all stakeholders, including asset owners, to appeal to the stock market and society about the company’s intrinsic value and potential for transformation. This also includes activities to help the stock market understand the company’s true strengths and competitiveness, and to help society understand the positive impact of the company’s business. The fund’s activities are made public to gain support and empathy for investee companies.
Expansion of Co-creative Engagement:
- Whereas conventional engagement has been conducted in a closed environment between companies and investors, our co-creative engagement expands the scope of engagement to include asset owners, the stock market, and society, in addition to investee companies.
- The knowledge and networks of asset owners are actively utilized for sharing investee information and discussing value-up ideas. Asset owners’ knowledge and resources are used for value-up of investee companies.
- For investee companies, the fund acts as a good understanding partner to management while maintaining a sense of tension, and strives to enhance corporate value through hands-on business support based on in-depth research.
Our Uniqueness
The Asuka Value Up Strategy Marries Three different “DNA”.
Engagement Cases
Our unique portfolio consists of both growth and value companies is one of the source of unique alpha.
This stock selection has been made possible through the wide range of value up activities we have proposed to investee companies.
We always bring concrete managerial options based upon deep research to solve the problems each company faces
Summary of Value Up Activities
Summary of Value Up Activities and “changes” in portfolio companies（2014-2016）
Messages from PF Companies
CEO, Consumer Durable Goods Company
“Though Asuka might be classified as financial investors, their mindset and approach is completely different from stereotypical financial investors. Their proposals include more “managerial” points of view than pure investors points of view such as the information on competitive analysis in oversea markets which we can not find out by ourselves.Their proposals give us good insight on the business planning in the future.”
CEO, Health Care Service Company
“Asuka has continuously brought creative business ideas to boost our corporate value. Introduction of new client channel, cost reduction and more. The dialogue with investors tend to focus on the capital issue, but the discussion with Asuka tend to focus to improve our business itself.“
CEO, Specialty Retailer Store Chain
“I guess it was made possible through their hands-on approach. In discussion store roll-out planning, for example, they have visited so many of our stores and converged numerical analysis and qualitative analysis into proposals. In other words,they understand the reality of our business”
CEO, Internet Service Company
“The uniqueness of Asuka’s approach is not only the excellence of proposal, but also the support to implement their proposal. They suggested that we explore the business in China.They actually helped us to make market research in China by setting up appointments and even visiting China together. Our launch of our China business owe al lot to Asuka”
On ESG
Asuka Value Up Strategy and Japan’s Stewardship Code
AsukaAsset Management Co.,Ltdwhich manages Asuka Value Up Fund has announced its support of the Japan’s Stewardship Code.（Aizawa Asset Management : stewardship.pdf ）
Asuka Value Up Strategy and ESG
We believe ESG activities sincerely taken by companies will successfully improve the corporate value in the long term through the enhancement of cash flow continuity and lowering the discount rate.
Based upon a long term investment point of view, we aim at discovering high quality companies and improving the corporate value of those companies through friendly dialogue and proposal with the companies.
As described above, we believe that Asuka Value Up Strategy and ESG share the same philosophy in selecting the excellent companies based on the long term persistency. We have utilized ESG’s approaches to enhance / complement our proprietary engagement approaches.
We don’t use ESG screening methods to figure out investment candidate. We apply ESG concept to check the validity of our stock selection.
In the stock selection process, we maximize the use of the ESG integration approach to figure out the hidden risk of the company. We also utilize ESG thematic approach to check the long term validity of macro circumstances which the investee candidates belong to.
In the shareholder’s engagement process, we might use the ESG engagement approach to improve the corporate value of the companies when we believe that the company’spoor compliance with ESG is destroying the corporate value and the improvement of ESG compliance will impact on corporate value.
Asuka Value Up Strategy and PRI (Principles for Responsible Investment)
We believe that there is not an overlap between the investment philosophy of Asuka Value Up Strategy and PRI, though our philosophy is alpha generation through our unique value up approach. We support the philosophy of PRI.
In signing the principles, however, we are carefully checking the prospective conflict between our existing product and PRI requirements.
Consequently, we haven’t signed PRI at this stage. We work on investment and shareholder’s engagement through our proprietary approach which includes ESG point of view.
As for the compliance with PRI in the future, we will sincerely discuss it, considering both the requirements from our existing clients and society.