Nakano Asset Management's 'quality growth' active funds?

[ChapInTokyo]

I was just reading about the two new active funds that Nakano Asset Management are launching on April 25th.

「なかの日本成長ファンド」「なかの世界成長ファンド」新規設定のお知らせ
https://nakano-am.co.jp/news/%E3%83%95% ... %E3%81%9B/

(English machine translation)The investment style is a long-term investment that advocates "quality growth" as a thorough follow-up. We will carefully select and hold long-term companies with the potential and management skills to sustainably provide added value over the long term. Through a portfolio of quality growth backed by highly professional investors, we will maintain a position to provide full-fledged long-term industrial capital to investee companies. We will seriously engage each company to make it a better company, and while upgrading ourselves, we will aim to realize a long-term investment fund representing Japan from a long-term perspective beyond generations.

I'm intrigued, as I've been looking at the bubble-like DOW and NASDAQ values against the weak yen exchange rate and feeling reluctant to put money into my spanking new NISA account.

I guess most of you on this board are confirmed low cost index mutual funds guys... what do you think of skewing a mainly index funds based portfolio with a bit of money stashed in an active fund with a long time horizon like these?

[captainspoke]

That's just a press release.

What's the fund's expense ratio, any front/back load, where's the list of their holdings--total number, weight in top 20/50, sector breakdown, cap weightings..., what's the turnover, how old is the fund, etc.

[RetireJapan]

I guess most of you on this board are confirmed low cost index mutual funds guys... what do you think of skewing a mainly index funds based portfolio with a bit of money stashed in an active fund with a long time horizon like these?

Unless you're very lucky, those funds are unlikely to outperform the market after fees. They will likely be closed down in a few years.

But if you really want to invest in them, just use a small amount of money and let us know how you did 5-10 years down the line

[ChapInTokyo]

These funds are launching on April 25 2024 so no performance or composition details yet but the press release had this info below.

It's a new company launched last fall by the former chairman of Saison securities which is known for their fund of funds balanced funds based on Vanguard's low cost ETFs. I assume that the new active products, being fund of funds according to the previously linked article, will be somewhat similar long time horizon products, except they are actively managed rather than indexed.

I'd usually stand on the sidelines for a year or so with new funds, but my interest has been piqued because it's the new company of this guy Nakano who pretty much kick started the move to low cost funds in Japan.

Nakano Japan growth fund

• Investment target, characteristic: A bottom-up investment management through stringent selection of Japanese stocks which in the opinion of the fund has long term profit growth potential

• Expenses: Front load: none/Expense Ratio: 1.1% incl VAT per year/back load: none

• Management style: "Quality-Growth Investment" to companies with long term performance growith

• Fund launch date: April 25 2024

• Initial offer period: April 19 2024 - April 24 2024

• Sales agent: Rakuten Securities

Nakano World growth fund

• Investment target, characteristic: Investment with a long term view into the world's growth companies

• Expenses: Front load: none/Expense Ratio: 1.3% +- approx 0.2% incl VAT per year/back load: none

• Management style: "Quality-Growth Investment" to companies with long term performance growith

• Fund launch date: April 25 2024

• Initial offer period: April 19 2024 - April 24 2024

• Sales agent: Rakuten Securities

[ChapInTokyo]

I guess most of you on this board are confirmed low cost index mutual funds guys... what do you think of skewing a mainly index funds based portfolio with a bit of money stashed in an active fund with a long time horizon like these?

Unless you're very lucky, those funds are unlikely to outperform the market after fees. They will likely be closed down in a few years.

But if you really want to invest in them, just use a small amount of money and let us know how you did 5-10 years down the line

Good advice! I'm initially thinking of testing the waters with just a small amount. The money I put into this guy Nakano's Saison Vanguard Global Balance Fund way back when has tripled in value over the years (I was lucky!), so I'm thinking why not bet on this guy again with his deeply unfashionable actively managed Japanese fund...

[adamu]

Past performance is not an indicator of future performance. Look up, e.g. Neil Woodford.

It sounds like your mind is set to be honest. I'll just repost this.

https://monevator.com/is-active-investi ... -sum-game/

[ChapInTokyo]

Past performance is not an indicator of future performance. Look up, e.g. Neil Woodford.

It sounds like your mind is set to be honest. I'll just repost this.

https://monevator.com/is-active-investi ... -sum-game/

Thanks for the sobering example of Woodford and also the zero sum game article. I find the idea of having a small portion of my portfolio in an actively managed Japan growth fund quite appealing because so many companies in the Nikkei index seem well past their prime. With yen being so weak, the idea of having a well picked portfolio of long term quality growth Japanese companies seems like a nice one.

Going by the "greater fool" theory, I'm wondering whether a long time horizon active manager might not have a good chance to put together a portfolio of undervalued but great Japanese companies. Or is this such a long shot, considering the higher expense ratios, that it is only for the gambler?

[Deep Blue]

I wouldn’t touch it with a barge pole.

[ChapInTokyo]

That's just a press release.

What's the fund's expense ratio, any front/back load, where's the list of their holdings--total number, weight in top 20/50, sector breakdown, cap weightings..., what's the turnover, how old is the fund, etc.

The registration statement for Nakano World Growth Fund filed at the FSA disclosed the third party active funds that that they will combine in their portfolio :

- T. ROWE PRICE SICAV - Global Impact Equity Fund (Class S, yen denominated)
- COMGEST Global Equities Fund (fund for institutional investors)
- COMGEST Europe Fund 90 (fund for institutional investors)
- ALLIANCE BERNSTEIN Emerging Markets Growth Fund
- ALLIANCE BERNSTEIN Global Growth Portfolio

https://disclosure2.edinet-fsa.go.jp/WZ ... x?S100T4MU,,#!

Nakano Asset Management's expense ratio of 1.3％±0.2％ approx incl VAT is lower than the published fee levels for these foreign funds, so it seems Mr Nakano has negotiated a lower 'institutional' fee from these foreign asset managers in a similar fashion to what he supposedly arranged with Vangard when he designed the Saison Vanguard Global Balanced Fund.

I'm hoping that they'll announce the stocks that they will include in the Nakano Japan Growth Fund soon though, as that will be interesting to see. It's possible they won't do it until after they've launched in order to prevent front running by speculators.

[ChapInTokyo]

I wouldn’t touch it with a barge pole.

You're very wise. After all, this particular company hasn't demonstrated their stock picking skill at this point and their expense ratio is several orders of magnitude higher than an index fund.

I'm keeping an eye on them though, bearing in mind this observation about the active/passive discussion in Jesper Rangvid's From Main Street to Wall Street - How the Economy Influences Stock Markets and What Investors Should Know (Oxford University Press, 2021). https://rangvid.com/MainStreetWallStreet.html

The active/passive discussion has a certain element of philosophical thinking to
it. For prices to exist, trading is needed. It is only when a trade happens that a price
is determined. For prices to adjust, someone must make an active decision. But, if
everybody is passive, who sets the price? Who distinguishes good firms from bad
firms? Basically, if everybody turns passive, who makes sure that capital markets
function? This has an interesting implication: the more passive investors there are,
the easier it is for active investors to outperform. If few investors follow firms, it
becomes relatively easier to gain informational advantages as an active investor,
and thus also relatively easier to outperform. Pastor & Stambaugh (2012) were
first to articulate this. So, when active managers struggle to demonstrate value-
for-money, there are good reasons why more and more investors become passive.
On the other hand, the more is invested passively, the higher is the likelihood that
an active manager will outperform.

Lesson 4. It is difficult to find outperforming active mutual funds. Hence, many
investors are turning passive. The more passive investors there are, however, the
easier it should be for active investors to outperform.