Head To Head

HEAD-TO-HEAD: AB vs Nomura

FSA compares two large-cap Japan equity products: the AB FCP I - Japan Strategic Value Portfolio Fund and the Nomura Japan Strategic Fund.

by Francis Nikolai Acosta 29 September 20172 August 2022

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Three-year performance of the funds and their benchmark, according to FE data.

Both funds have underperformed the Topix on a three-year basis, with the Nomura fund edging slightly ahead of the AB fund.

Yew attributes the AB fund’s underperformance to its investment in Sumco, which was the portfolio’s largest active position in 2015. The stock fell more than 50% at the time, tarnishing the fund’s track record since then.

The Nomura fund, in turn, underperformed due to the fund manager’s poor stock selection among the fund’s small-cap holdings, said Yew.

Yew also said he was concerned about the size of the Nomura fund, which has grown to around ¥137.24bn ($1.21bn). He believes that the size makes it more difficult for the manager to effectively implement the investment process.

Nevertheless, both funds have been recovering in 2017, driven by the outperformance of the value investment style since the latter half of 2016.

According to FE data, the AB fund is more volatile than the Nomura fund. Yew noted that the AB fund was expected to be more volatile given that it had a more concentrated portfolio.

Three-year annualised volatility

Fund / Benchmark	Volatility
AB fund	18.41
Nomura fund	17.05
Topix Index	16.04

Source: FE Analytics

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