AVI Japan Opportunity Trust (LON:AJOT) has announced its monthly factsheet for October 2025.
Manager’s Comment
AJOT started 2025 on a strong note, returning +5.9% in Q1, outperforming the benchmarks +0.7% (both in GBP). Key performance drivers were TSI Holdings’ sale of real estate worth c.30% of its market cap and Tecnos Japan tender offer at a +39% premium. However, AJOT has recently underperformed the MSCI Japan Small Cap Index, as larger benchmark constituents, many of which fall outside AJOT’s universe, have rallied sharply. The benchmark’s weighted average market cap is £2.7bn (97 names >£3bn) versus AJOT’s £0.7bn (largest: Rohto Pharmaceutical at £2.7bn). Since March 31st, those 97 larger names have risen +38% on average in JPY, while sub-£3bn names are up +18%. This divergence likely reflects foreign capital inflows following eased US trade tensions, the “Takaichi trade,” and the BoJ’s dovish stance on rate hikes.
Recent performance has been shaped more by macro and political factors than stock specifics. The surprise election win of Sanae Takaichi, a protégé of former PM Abe, drove market volatility and a weaker yen. Her pro-defence, tech, and stimulus agenda could support markets long-term, though coalition uncertainty, following the LDP’s split with Komeito and a new partnership with the Japan Innovation Party, created some short-term volatility.
After an active AGM season, we have experienced a quieter period for catalysts. We used this time to increase ownership of several names, including Atsugi, Synchro Food, and Aoyama Zaisan Networks. At October month-end, AVI’s combined stake exceeded 5% of voting rights in 9 holdings, representing 64% of NAV.
The Financial Services Agency is conducting a review of the Corporate Governance Code, aiming to accelerate reforms in capital efficiency, governance and shareholder communication. Proposals include longer AGM windows, tighter timelines for reducing cross-shareholdings, and encouraging reinvestment in core businesses. We look forward the outcome of the planned revision.
The team has several interesting ideas in the pipeline, ready for capital from the FJV rollover to be deployed. Subject to completion, the rollover of FJV assets into AJOT is expected to add approximately £185m of capital by November-end. This enhances capacity to build larger stakes in existing positions and new ideas.
AJOT is a major shareholder involved in AVI’s constructive engagement strategy, building meaningful stakes to unlock value by driving improvements in business operations alongside traditional themes of capital efficiency, governance, and shareholder communication.
