Asia Pacific and Japan Sustainability
The strategy was launched in June 1988, and since September 2019 has been a dedicated sustainability strategy.
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The strategy was launched in June 1988, and since September 2019 has been a dedicated sustainability strategy. This equity-only strategy aims to achieve long-term capital growth by investing in a portfolio of between 30-60 companies in the Asia Pacific region, including Japan, that are helping to bring about a more sustainable future.
The ability to invest directly in Japan allows clients to own high-quality Japanese companies far earlier in their Asian growth journeys, as well as accessing a greater pool of domestic companies with attractive growth opportunities that are positioned to contribute to, and benefit from, sustainable development.
Strategy highlights: a focus on quality and sustainability
- Companies must contribute to sustainable development and make a net-positive impact to a more sustainable future. Portfolio Explorer >
- We invest in high-quality companies with exceptional cultures, strong franchises and resilient financials. How we pick companies >
- We avoid companies linked to harmful activities and engage and vote for positive change. Our position on harmful products >
- Our approach is long-term, bottom-up, high conviction and benchmark agnostic
- We focus on capital preservation as well as capital growth – we define risk as the permanent loss of client capital
Latest insights
Strategy update: Q1 2023
Asia Pacific and Japan Sustainability strategy update: 1 January - 31 March 2023
The major changes to the strategy over the course of the quarter were the sale of Techtronic Industries (Hong Kong: Industrials) and the initiation of positions in Zheijang Supor (China: Consumer Discretionary) and Nihon M&A Center (Japan: Industrials).
Zheijang Supor is a leading manufacturer of cookware and small domestic appliances in China. Supor is majority owned by the French company SEB, who itself has family ownership behind it. Leading the business day to day is a high-quality, professional management team that boasts experience at Microsoft and Nestle: we believe family ownership and a competent management team is a very powerful combination. Longer term, Supor is well positioned to benefit from China’s middle classes want to spend time and money on eating at home. In other countries we have seen kitchen appliances are relatively defensive purchases and not tied to housing cycles: we believe that to be the case with Supor.
We also initiated a position in Japan’s leading provider of SME (Small & Medium sized Enterprises) advisory services, Nihon M&A Center. Japan has a looming succession crisis in its pivotal SME sector: 3.6m companies that employ roughly 70% of private sector employees1. With the average age of these entities now over 60 years old and only half having a successor in place, they must either sell or be shut down. Nihon M&A Center plays an important role in matching sellers and buyers of SMES through their large network of tax accountants and regional banks. The opportunity that lies ahead of Nihon M&A Center to facilitate progress in Japan’s SME market remains vast, and we believe the people at the helm have the right combination of long-termism and competence to ensure Nihon continues to be a leading franchise in this space.
We increased our position in Aavas Financiers (India: Financials), a leading provider of home loans to low and middle-income households, mostly in urban locations in India. Through multiple conversations and a study of history, we believe the people and culture at Aavas Financiers operate at the other end of the spectrum to the financial institutions that have grabbed headlines over the course of the last month or so. This is backed up with tremendous asset quality and a conservatively levered balance sheet. With mortgages to GDP levels at 4% in the areas Aavas Financiers focuses2, compared to 68% in the UK3, we believe there are many years of growth ahead for a trusted partner for those looking to buy their home for the first time. We have admired Aavas Financiers for a long time, but only in recent months has the valuation reached levels we were comfortable paying.
These purchases were funded by the sale of our position in Techtronic Industries. We have long been attracted to the franchise at Techtronic Industries, a leading player in the development and roll-out of battery-powered power tools. However, we have grown increasingly uncomfortable with the management team and culture. We are very fortunate in Asia to have a long list of high-quality companies to invest in where we do not need to take such risks with management teams that make us uneasy.
Smaller transactions over the period included adding to positions in Japan Elevator Service (Japan: Industrials) and Mani (Japan: Healthcare), two Japanese names that we believe to have world-class franchises and are offering fantastic growth opportunities. The strategy’s largest holding, Tube Investments (India: Consumer Discretionary), was trimmed to manage position size.
1 Source: OECD iLibrary, Financing SMEs and Entrepreneurs 2022: An OECD Scorecard, https://www.oecd-ilibrary.org/sites/a4e7ef59-en/index.html?itemId=/content/component/a4e7ef59-en
2 Source: The Times of India, Low-income home loan turning affordable housing into a reality in India, 30 November 2022. https://timesofindia.indiatimes.com/blogs/voices/low-income-home-loans-turning-affordable-housing-into-a-reality-in-india/
3 Source: HDFC, Investor Presentation, February 2023. https://www.hdfc.com/content/dam/housingdevelopmentfinancecorp/pdf/investors/relations/investor-presentations/2022/hdfc_02_feb_2023.pdf
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
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Strategy update: Q4 2022
Asia Pacific and Japan Sustainability strategy update: 1 October - 31 December 2022
Over the course of the quarter the following two new companies were added to the portfolio.
The first, Advanced Energy Solution (AES) (Taiwan: Industrials), a provider of battery packs to the e-bike, data server and electric vehicle markets. There are very obvious tailwinds driving the growth of electric batteries across many sectors but we have long struggled to find companies who have the ability to create any value from their part in the value chain: many players in the supply chain have strong sustainability positioning, given their role in the proliferation of batteries, but do not meet our quality threshold. AES, however, is a rare exception where they enjoy an attractive competitive position thanks to their ability to provide customised packs to customers that are essential to the performance and safety of end-products. In return, AES enjoys long, loyal relationships with customers that come with pricing power and attractive levels of profitability. The management team at AES is highly competent with a track record of long-termism that we are very excited to partner with.
SHIFT Inc. (Japan: Information Technology), a provider of outsourced software testing services, was also added to the portfolio over the quarter. Shift’s high-quality, low-cost testing capabilities allows their customers to focus on higher-value parts of their business (like development) while also reducing the cost, both financial and reputational, of releasing poor-quality software. We believe the company’s founder and CEO, Tange-san, to be a very high-quality steward who we back to continue delivering attractive levels of growth in an under-penetrated market, with minimal levels of competition.
Well-documented, top-down concerns about Chinese growth created the opportunity to add to a few of our mainland-listed companies (Amoy Diagnostics: Health Care – cancer diagnostics; Glodon: Information Technology – software for the construction industry; Kingmed Diagnostics Group: Health Care – independent diagnostic laboratories) as well as Silergy Corp (Information Technology), a Taiwanese-listed designer and manufacturer of analog semiconductors with material exposure to China.
The portfolio’s small holding in Naver (South Korea: Communications Services) was sold over the period as we failed to gain comfort in the company’s long-term quality and sustainability positioning. Infosys (India: Information Technology) was also sold for valuation reasons.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Strategy update: Q3 2022
Asia Pacific and Japan Sustainability strategy update: 1 July - 30 September 2022
Top-down macroeconomic headlines continue to dominate Asian markets with manic swings in sentiment based on the reading of central banks' policies, economic data and geopolitical narrative.
Our focus on owning a portfolio of high-quality, resilient franchises run by long-term competent owners, as well as our understanding that we add little value in the forecasting of macroeconomic events, meant there were minimal changes to the portfolio over the quarter.
Positions in Tech Mahindra (India: Information Technology), Japan Elevator Service (Japan: Industrials) and Mainfreight (New Zealand: Industrials) were increased as questions over how an economic slowdown would impact their respective business models weighed on valuations: we believe all enjoy resilient franchises with potential for both margin expansion and long-term growth. In Japan Elevator’s case, they enjoy a highly advantageous position in a market ripe for consolidation while Mainfreight remains very early in their overseas expansion.
On the back of very strong performance, we trimmed the strategy’s large holdings in Mahindra & Mahindra (India: Consumer Discretionary) and Tube Investments (India: Consumer Discretionary) as they began to dominate the portfolio. We also reduced the position in Voltronic Power (Taiwan: Industrials), as valuations reached uncomfortably high levels, despite the high-quality franchise.
Finally, we exited the position in Bank OCBC Nisp (Indonesia: Financials) after re-evaluating the quality of the franchise and because we have a preference for the parent company.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Strategy update: Q2 2022
Asia Pacific and Japan Sustainability strategy update: 1 April - 30 June 2022
In markets such as these, where share prices of a particular industry, sector, or even country, move materially and as one on the back of economic headlines, the prospects for bottom-up stock selection tend to improve.
Over the quarter, we added to four names where we believe the long-term investment case remains robust but where valuations have de-rated and thus increased the potential for attractive long-term returns. The most material of these additions were to Mainfreight (New Zealand), Glodon (China) and Japan Elevator Service (Japan).
Mainfreight is an ambitious, New Zealand-based, logistics provider with one of the strongest cultures we have come across. A culture that we believe provides an enduring competitive advantage. Their passion and focus on culture is seen in the below excerpt from their recently released annual report:
The Mainfreight culture – our disciplines and style of doing business – is part of our “secret sauce”. We take a decentralised approach to business – all 305 branches measure their quality and manage their own profit and loss statements. No cross-subsidisation appears in these financials and they include interest and depreciation; there is no hiding from poor performance. Decision-making that happens close to the customer, promotion of our people from within, and sharing our profits with those who earn them are other key pillars of who we are. At all times we look to dispense with bureaucracy, helping decisions to be made quickly and efficiently.*
Mainfreight has been sold-off alongside the wider logistics industry, as the market tries to understand what growth and profitability looks like once COVID-induced bottlenecks are worked out. We now find Mainfreight trading on valuation multiples roughly in-line with industry peers, despite being meaningfully higher quality and offering far more attractive opportunities for long-term growth.
We also added to Glodon, the Chinese based-provider of software to the construction industry, as broader concerns around the property sector led to a sell-off in names with any association to the sector. Glodon should be insulated from shorter-term economic stress as its software is a key, everyday input into improving the efficiency and profitability of China’s bloated, inefficient infrastructure and construction companies. Longer term, we remain very enthusiastic about Glodon’s ability to diversify its product offering and expand its addressable market.
Japan Elevator Service (JES) plays an important role in maintaining, and improving, the efficiency and safety of Japan’s housing infrastructure, with longer-term ambitions of growing throughout India and South East Asia. A general sell-off of all things seen as “growth” in Japan has brought JES to a valuation that brings longer-term returns more in line with the opportunity to profit from growing domestic market share gains. Short-term concerns have also led to the multi-decade overseas opportunity to be largely ignored.
Over the quarter, the position in Hualan Biological Engineering (China) was sold as we failed to build conviction in the ability of the company to mitigate growing competition from state-owned players. Positions in Tata Consumer Products (India) and Voltronic Power (Taiwan) were trimmed as increasingly full valuations provided greater headwinds to longer-term returns.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Proxy voting: Q1 2023
Asia Pacific and Japan Sustainability proxy voting: 1 January - 31 March 2023
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter, there were 65 resolutions from eleven companies to vote on. On behalf of clients, we voted against one resolution.
We voted against Amoy Diagnostics’ request to increase share capital and share count as we did not have sufficient information at the time of voting for the justification of these amendments to articles. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Proxy voting: Q4 2022
Asia Pacific and Japan Sustainability proxy voting: 1 October - 31 December 2022
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 74 resolutions from 15 companies to vote on. On behalf of clients, we voted against three resolutions.
We voted against the approval of CSL's remuneration report and the equity-based remuneration of the CEO. We believe their remuneration focuses on the shorter term rather than the longer term, and the absolute level of CEO pay, and the gap between median pay, is excessive. (two resolutions)
We voted against the election of a director to the supervisory board at Foshan Haitian Flavouring as we do not believe they are truly independent. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Proxy voting: Q3 2022
Asia Pacific and Japan Sustainability proxy voting: 1 July - 30 September 2022
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 189 resolutions from 22 companies to vote on. On behalf of clients, we voted against two resolutions.
We voted against Philippine Seven’s request for management to approve all other business matters before the annual general meeting (AGM) of shareholders. We consider ourselves active shareholders and prefer to vote on such matters at the AGM. (one resolution)
We voted against the election of the chairman of the audit committee at Vitasoy as the committee met less than four times during the last fiscal year. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Proxy voting: Q2 2022
Asia Pacific and Japan Sustainability proxy voting: 1 April - 30 June 2022
During the quarter, there were 258 resolutions from 33 companies to vote on. On behalf of clients, we voted against six resolutions.
We voted against Amoy Diagnostics’ request to transfer product rights and equity to a subsidiary, and to amend authorised share capital, as we did not have sufficient information at the time of voting. (two resolutions)
We voted against the approval of an Employee Stock Purchase Plan at Glodon, as we believe one-year vesting periods are too short term and not in shareholders' interests. (three resolutions)
We voted against Pentamaster’s request to issue shares without pre-emptive rights, as the share discount rate had not been disclosed. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
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For illustrative purposes only. Reference to the names of example company names mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies. Companies mentioned herein may or may not form part of the holdings of Stewart Investors. Holdings are subject to change.
Certain statements, estimates, and projections in this document may be forward-looking statements. These forward-looking statements are based upon Stewart Investors’ current assumptions and beliefs, in light of currently available information, but involve known and unknown risks and uncertainties. Actual actions or results may differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements. There is no certainty that current conditions will last, and Stewart Investors undertakes no obligation to correct, revise or update information herein, whether as a result of new information, future events or otherwise.
Source: Stewart Investors investment team and company data. Securities mentioned are all holdings which have/have had a portfolio weight over 0.5% from representative Asia Pacific Sustainability Strategy, Asia Pacific & Japan Sustainability Strategy, Asia Pacific Leaders Sustainability Strategy, European Sustainability Strategy, European (ex UK) Sustainability Strategy, Global Emerging Markets Leaders Sustainability Strategy, Global Emerging Markets Sustainability Strategy, Indian Subcontinent Sustainability Strategy, Worldwide Sustainability Strategy and Worldwide Leaders Sustainability Strategy accounts up to 31 March 2023.
The Stewart Investors supports the Sustainable Development Goals (SDGs). The full list of SDGs can be found on the United Nations website.
Source for Climate Solutions and impact figures: © 2014–2023 Project Drawdown (drawdown.org). Source for Human Development Pillars: Stewart Investors investment team.
Source for climate solutions and human development analysis and mapping: Stewart Investors investment team. Contributions are defined by the team as demonstrable contributions to any solution, either direct (directly attributable to products, services or practices provided by that company), or enabling (supported or made possible by products or technologies provided by that company).
Investment terms
View our list of investment terms to help you understand the terminology within this document.
Fund data and information
Key documents and links
Fund prices and details
Click on the links below to access key facts, literature, performance and portfolio information for the funds and share classes available in this jurisdiction:
Stewart Investors Asia Pacific and Japan Sustainability Fund
| Fund name | Fund type | Currency | Price | Daily change | Price date | Factsheet |
|---|---|---|---|---|---|---|
| Stewart Investors Asia Pacific and Japan Sustainability Class A (Acc) | OEIC | GBP | 1615.08 | -0.34 | 07 Jun 2023 | |
| Stewart Investors Asia Pacific and Japan Sustainability Class A (Inc) | OEIC | GBP | 285.88 | -0.35 | 07 Jun 2023 | |
| Stewart Investors Asia Pacific and Japan Sustainability Class B (Acc) | OEIC | GBP | 1903.30 | -0.34 | 07 Jun 2023 | |
| Stewart Investors Asia Pacific and Japan Sustainability Class B (Inc) | OEIC | GBP | 292.98 | -0.34 | 07 Jun 2023 |
Share prices are calculated on a forward pricing basis which means that the price at which you buy or sell will be calculated at the next valuation point after the transaction is placed. Where a fund price is marked XD, this means that the fund is currently Ex-Dividend. Past performance is not necessarily a guide to future performance. The value of shares and income from them may go down as well as up and is not guaranteed. Please note that the yield quoted above is not the historic yield. It is considered that the yield quoted represents the current position of investments, income and expenses in the fund and that this is a more accurate figure. Investors may be subject to tax on their distribution. The yield is not guaranteed or representative of future yields. You should be aware that any currency movements could affect the value of your investment. The Funds within the First Sentier Investors Global Umbrella Fund plc (Irish VCC) are denominated in USD or EUR.
