THE INVESTOR CENTRE
THE INVESTOR
|
35
J
apan accounts for nearly a third of the
portfolio.Things are stirring. Kyocera,
the most recent purchase in the portfolio,
which was made during the fourth quarter
last year, is typical of many Japanese
companies in that there is, we believe,
a large gap between price and value.
A common problem in Japan has been
managements’ reluctance to do anything
to realise the value.This is changing,
evident in the huge increase in share buy-
backs last year, which had the e ect of
increasing return on equity and reducing
the ine ciency of Japanese balance sheets
stu ed with cash. Kyocera has cash and
securities worth nearly three-quarters of
its market capitalisation.The core operation
of the company – ceramics for every
purpose, from kitchen knives to mobile
telephone components – is strong, with high
market shares in most businesses and decent
pro tability.Although management talks of
enhancing shareholder value, and has made
some steps with the buyback of shares, there
is a long way to go.The gap between price
and value is su ciently wide to allow us to
be patient. Meanwhile, some companies
most determinedly resistant to shareholder
pressure to increase returns, such as
Nintendo (which we own) and Fanuc, have
been taking steps to do exactly that.
OLDFIELD PARTNERS
High Octane
Things are changing in Japan as
managements look to realise value
The gapbetween
price andvalue is
su cientlywide
S
o far this year, investment markets have
been dominated by the commencement
of full QE by the ECB, a continued sharp
rally in the US dollar, growing expectations
that the Federal Reserve will begin raising
interest rates by mid-2015 (or slightly later)
and further weakness in commodity
markets given ongoing signs of slower
growth in China.The extent of the ECB’s
QE programme exceeded investor
expectations, with the result that European
government bond yields have declined to
new all-time lows. US employment data has
continued to impress, with the consensus
now expecting the rst rate hike later
this year. Increasingly, supportive relative
growth and interest rate di erentials in the
US (versus Europe) have resulted in a sharp
rally in the dollar compared with all major
currencies, particularly the euro. Negative
European interest rates have also encouraged
a rally in equities and other risk assets. Credit
spreads in the US, having widened during
the second half of 2014, have tightened once
again as investors have sought yield.The
high-yield bond market has recovered very
strongly this year following the energy-
related setback in the second half of 2014.
Our investments in this sector have been
the main contributors to positive returns.
Allocations to investment grade credit and
non-agency mortgage-backed securities have
also added value.
PAYDEN & RYGEL
Multi Asset
Eurozone QE leads to new all-time
lows for government bond yields
The high-yieldbond
market has recovered
very strongly this year
T
here remains a signi cant amount of
capital targeting the property sector,
seeking stable income yield and exposure
to continued economic recovery via rental
growth.This continues to support valuations
across all sectors of the property market and
in all but the most challenging of locations.
During the rst quarter we completed two
acquisitions totalling £84.3 million. From
AberdeenAsset Management we acquired
a 50% share of New London House in the
City for £25.2 million, bringing 100%
ownership to the St. James’s Place Property
funds.This was the last external joint
venture within the portfolios and is in line
with our business plan.We also acquired
St. Georges HouseWest inWimbledon for
£59.1 million. Comprising 85,000 sq ft of
recently refurbished GradeA o ce space,
the property provides scope for signi cant
rental growth over the next two years.
We continue to see encouraging signs of
increased occupier demand throughout the
UK property market, which is starting to
drive rental growth.This has had a positive
impact on asset management initiatives
across the portfolio, with lettings and lease
renewals ahead of estimated rental value
(ERV). For example, we have extended two
leases on units at Chelmsford Industrial
Estate and have completed a new 10-year
lease on another. Rents payable on all three
are ahead of ERV, which has had a positive
impact on valuation.
ORCHARD STREET
Property
Encouraging signs of increased
occupier demand throughout the UK
We have completed
two acquisitions
totalling £84.3million
Philip Gadsden
Richard Oldfield
Scott Weiner, Brian Matthews and
Brad Boyd
