Sector Zen aims to provide attractive returns, through exploiting inefficiencies within one of the most under-researched developed equity markets in the world, utilizing its value-based, contrarian approach.
A research driven, independent and contrarian oriented investment process is using value as the predominant selection criteria. Inspired by Benjamin Graham, the investment team focuses on available facts as opposed to forecasting the future. Identified deep value situations are subjected to an analysis of potential re-rating catalysts before a trade is implemented. Common examples of catalysts are potential for corporate restructuring and buy-outs. The current trend of increased focus on corporate governance in Japan is creating an attractive opportunity set for the Fund's strategy. Market risk is managed through using short positions and index puts. The investment edge comes from a combination of the team's long experience with the Japanese stock market and their focus on an under researched market segment.
Investment objective and strategy
The objectives of the Fund are to achieve attractive returns with a volatility of 10-15% and a gross exposure of 100-250%. In seeking to achieve its objectives, the Fund may employ various investment strategies, including, but not limited to, the use of leverage, short selling and investment in options, financial futures and other derivative instruments.
The investment team aims to provide attractive returns through exploiting inefficiencies within one of the most under-researched developed equity markets in the world, utilizing a value-based and contrarian approach. Value is the predominant criteria for stock selection, since this technique has been consistently successful in Japan. The investment manager utilizes a bottom-up, fundamental research approach, based on well-established methodologies for value investing.
The Japanese equity market possesses some distinctive characteristics that make it stand out among other developed equity markets including low analyst coverage, an increasing rate of corporate action (M&A, restructuring, etc.) and a decent liquidity across the caps (from micro- to large-cap). Owing to these conditions, the investment team is provided with a diverse investment universe within which to apply their bespoke strategy.
With the inherent risks in the market, the investment manager runs a well-diversified portfolio across different industries both on the long and short side. In addition, index derivatives are utilized on the short side to protect the downside, in case of large market moves.
Structure and registrations
The Sector Zen Fund is organised as a sub-fund under Sector Investment Funds Plc and is approved and regulated by the Central Bank of Ireland. Investments can only be made by investing through various feeder funds and are stricly offered to professional, acreddited or qualified investors.
The Fund is managed by Sector Theta AS, a Norwegian investment firm regulated by the Financial Supervisory Authority of Norway.
Responsible investments and SFDR disclosures
SFDR-related disclosures applicable for Sector Theta AS are available here.