Firm Description
Invesco Asset Management (Japan) Limited (“IAMJ”) is a leading independent global
investment management company and operating and managing equity, balanced and
money market vehicles since 1983. The Tokyo based Invesco office obtained a
Japanese Investment Trust Manager license as one of the first foreign fund
management companies in 1990, and today, Japanese equity is one of the largest
foreign owned fund management operations in Japan, is managing Japanese assets for
institutional clients and individual investors.
Principal Owners
IAMJ is wholly-owned by Invesco Far East Limited which is wholly-owned by Invesco
Holding Company Limited. Invesco Holding Company Limited is wholly-owned by
Invesco Ltd, which is publicly traded on the New York Stock Exchange as IVZ.
Types of Advisory Services
IAMJ provides investment supervisory services, also known as asset management
services; manages investment accounts and provide investment advice for the advisory
accounts; issues periodical materials about the fund performance as well as market
views.
As of December 31, 2019, IAMJ manages approximately $ 24,363 million in assets for
its discretionary and advisory accounts.
Tailored Relationships
The goals and objectives for each client are documented in investment management
agreements/advisory agreements. Clients may impose restrictions on investing in
certain securities or types of securities for the Discretionary Investment Management
Agreement.
Types of Agreements
The following agreements define the typical client relationships.
Investment Management Agreement
Most clients choose to have IAMJ manage their assets through a Discretionary
Investment Management Agreement (hereinafter called the “IMA”). These include full
discretionary, Japanese investment portfolio services to pension clients based in Japan.
These services will be furnished against the payment of a fee which is based on the
value of asset under management and complexity of the mandate, and it is subject to
negotiation.
The scope of work and fee for an Investment Management Agreement is provided to the
client in writing prior to the start of the relationship.
Investments mainly include equities, bonds, funds, cash equivalents and financial
derivative instrument.
Investment Trust Management
This represents the management of investment trusts (hereinafter called the “J-fund”)
which are organized under Japanese laws and regulations and distributed to investors
in Japan, usually distributed through broker dealers and retail banks.
These services will be furnished against the payment of a fee which is based on the
value of asset under management and complexity of the mandate
Investments mainly include equities, bonds, funds, cash and cash equivalents and
financial derivative instrument.
Advisory Service Agreement
Some of the IAMJ’s client would like to obtain IAMJ’s advice on IAMJ expertise of
managing a portfolio of Japanese securities and enter an Advisory Service Agreement
(hereinafter called the “ASA”) with IAMJ.
The scope of work and fee for an ASA is provided to the client in writing prior to the start
of the relationship.
These services will be furnished against the payment of a fee which is based on the
value of asset under management and complexity of the mandate, and it is subject to
negotiation.
IAMJ will also provide sub-advisory services to affiliated entities under common
ownership of Invesco Ltd.
Termination of Agreement
The IMA and the ASA generally may be terminated by either party upon prior written
notice. Upon termination, any unearned fee will be refunded to the client in accord with
the client.
Fee and Compensation
Description
With regards to investment service includes the IMA, the J-fund and the ASA, IAMJ
receives payment of a fee which is based on the value of asset under management and
complexity of the mandate which are subject to negotiation.
Billing
Investment management fees are billed in arrears, meaning that IAMJ invoices the
client for the IMA and the ASA after the billing period ended. Billing period would be
subject to the agreement with the client; Payment in full is expected upon invoice
presentation. Client can elect to deduct fees from client’s assets or to have separate
bill on this.
With regards to the J-fund IAMJ will receive management fee after billing period ended
from a J-fund respectively. Billing period would be subject to its trust deed.
Performance-Based Fees
Performance-Based Fees
The client for Discretionary Investment Management Agreement can select fixed fee or
performance-based fees. Some of IAMJ’s clients select performance-based fee.
IAMJ has the fair allocation policy and procedures in place to ensure fair allocation of
executed securities among accounts/funds. Under certain condition, the orders are
combined with other client’s account and executed shares are allocated fairly by trading
system automatically. IAMJ Compliance receives Daily Allocation Report and confirms if
there is any unfair allocation or suspicious allocation by manually. In addition, IAMJ
monitors asset commonality of accounts which hire same investment strategy and asset
commonality report is periodically reported to Investment Risk Management Committee.
Performance fees
As negotiated with certain clients or the trust deed of J-Fund, additional fees may be
paid, based on portfolio out-performance relative to an agreed formula.
Other Fees
Brokerage fees would be incurred during the execution of securities transitions.
Custodian who keeps client money in outside Japan may charge transaction fees for
certain transaction that are usually small and incidental to the purchase or sale of a
security.
IAMJ may buy or sell securities or investment products in which IAMJ or Invesco Ltd’s
affiliates or the portfolios managed by IAMJ or IAMJ’s affiliates’ may have some financial
interest.
Concerning said investment product, there may be other fees such as the initial fees or
the redemption charges which are stated in the relevant prospectuses.
Conflicts of Interest
IAMJ may acquire funds which are managed by IAMJ’s affiliates for the clients’ portfolios.
In these cases, pre-approvals from clients need to be obtained in writing and the limits
on such investment, as well as the fees are needed to be agreed before any purchase
can be made.
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Description
IAMJ generally provides investment advice/managed assets for financial institutions,
investment companies, pension, trusts or foundations, corporations or business entities,
or other entities.
Client relationships vary in scope and length of service.
J-fund is mainly distributing to mainly individual investors in Japan.
Account Minimums
In general, the minimum account size for Japanese equity strategies is $ 30 million of
assets under management for the IMA which have direct holdings on the investments.
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Methods of Analysis
Japanese Equity Investment Security analysis methods are essentially based on company fundamentals analysis.
The research is primarily done by the internal analysts and portfolio managers. The
main sources of the information are obtained from direct contacts with companies
including meetings with company officials and/or management, onsite visits, conference
calls, etc. Sell-side research is also utilized complimentarily.
Global Quantitative Equity Investment Security analyses are based on quantitative research. The research team at Invesco
Global Quantitative Equity is responsible for all the quantitative researches, which
include factors analysis, investment infrastructure maintenance, simulation of fund
management methodology, investment model development, academic research
monitoring, etc. Publicly available data such as equity market related data, financial
results of individual companies, and also estimated earnings by sell-side analysts are
utilized.
Japanese Government Bond Investment We invest in Japanese bond market by quantitative approach to analyze individual
securities. We manage risk of Japanese bond portfolio by sector, duration and yield
curve.
Investment Strategies
Investment style of Japanese Equity Value strategy We see our investment style as “relative value,” as we construct portfolios with
inexpensive stocks relative to the market according to our in-depth analysis after the
valuation screening using price to earnings (P/E), price to book (P/B) and price to cash
flow (P/CF) ratios as screening criteria. We believe that stocks selected from the
cheapest quartile of the Japanese listed market can offer investors the opportunity for
superior returns relative to the benchmark over the long term. Based on this conviction,
the strategy seeks to outperform the benchmark over a full market cycle using a
value-oriented investment approach.
Investment style of Japanese Equity Advantage strategy We pursue a relatively concentrated approach to investing in Japanese companies with
measurable intrinsic value at compelling valuations. In search of high quality securities,
we focus on free cash flow generation by companies, and pay particular attention to the
advantages of intangible values (for example, but not limited to, brands, technical
development or strong customer base) which we believe contribute to strong free cash
flow generation and more pronounced shareholder value. Our unique approach to
identifying value generating companies has no bias towards style (value/growth) or
market capitalization (large/mid/small cap).
Investment style of Japanese Equity Small/Mid Growth We primarily invest in the small/mid cap companies in their early stages where the
companies will grow in size and their potential investment returns are deemed to be the
highest. Accordingly, the investment style is very much growth oriented focusing on the
growth stage of evolution of companies based on bottom up company research
including one-on-one meetings with management as well as on-site visit. The
investment time horizon is typically 3 to 5 years.
Investment style of Japanese Equity Dividend Growth strategy Through the team based and bottom-up approach, we select 60 to 80 attractively valued
Japanese companies with strong business model and sound balance sheet, which can
deliver sustainable dividend growth in the medium to long term in order to achieve
superior excess returns over a full market cycle. We utilize the established stock
selection process composed of the proprietary fundamental research and analysis, and
screenings based upon Invesco Japan devised “PDI (Probability of Dividend Increase)
score” and dividend yield.
Investment style of Global Quantitative Equity strategy We manage global or regional equity portfolios based on our proprietary quantitative
investment models/approaches as a part of Invesco Global Quantitative Equity. Our
products are categorized as passive strategy as well as quantitative active strategy.
Passive strategy pursues rigorous risk management in order to minimize tracking errors
but also paying attention to preservation of capital, which include thorough cost control
and default probability screening. Quantitative active strategy portfolio is managed
with our proprietary portfolio management system. The strategy seeks to outperform the
benchmark steadily by maximizing quantitative “alpha score” at a predefined level of risk.
Alpha score is generated from different kinds of factors such as valuation ratios, price
trend, earnings momentum etc.
Investment Style of Japanese Government Bond Strategy This strategy seeks to track the investment results of the Invesco JGB Index (JPY) by
investing in Japanese bonds market. Replication strategy of the index adopts sampling
method.
Risk of Loss
All investment programs have certain risks that are borne by investors. Our
investment approaches constantly keep the risk of loss in mind. Investors may face
the following investment risks:
➢ Market Risk: The price of equity, bond, fund or derivatives product may drop in
reaction to tangible and intangible events and conditions. This type of risk is
caused by external factors independent of a security’s particular underlying
circumstances. For example, political, economic and social conditions may
trigger market events.
➢ Inflation Risk: When any type of inflation is present, a real value of money in the
future will not be the same as that of today because purchasing power will be
eroded at the rate of inflation.
➢ Currency Risk: Overseas investments are subject to fluctuations in the foreign
exchanges between the home or base currency and the currencies of the
investments made. This is also referred to as exchange rate risk.
➢ Business Risk: These are specific risks associated with a particular industry or a
particular company within an industry.
➢ Liquidity Risk: Liquidity is the ability to readily convert an investment into cash.
Generally, assets are considered liquid if securities can be sold or bought in
large quantities with small bid and offer spreads. For example, Treasury bills are
highly liquid, while real estate properties are not.
➢ Financial Risk: Excessive borrowing to finance a business’ operations increases
the risk of profitability, because the company must meet the terms of its
obligations in good times and bad. During the periods of financial stress, the
inability to meet loan obligations may result in bankruptcy and/or a significant
declining of market value.
➢ Coronavirus and Public Health Emergencies: As of the date of this filing, there is
an outbreak of a novel and highly contagious form of coronavirus (“COVID-19”),
which the World Health Organization has declared constitutes a “Public Health
Emergency of International Concern.” The outbreak of COVID-19 has resulted in
numerous deaths, adversely impacted global commercial activity and contributed to
significant volatility in certain equity and debt markets. Measures taken by national
and regional governments, states, districts and municipalities, as well as the
general uncertainty surrounding the dangers and impact of COVID-19, are creating
significant disruption in supply chains and economic activity. As COVID-19
continues to spread, the potential impacts, including a global, regional or other
economic recession, are increasingly uncertain and difficult to assess.
Any public health emergency, including any outbreak of COVID-19, SARS,
H1N1/09 flu, avian flu, other coronavirus, ebola or other existing or new epidemic
diseases, or the threat thereof, could have a significant impact on IAMJ and its
client accounts. The extent of the impact of COVID-19 or any other public health
emergency on the operational and financial performance of IAMJ’s client accounts
will depend on many factors, including the duration and scope of such public health
emergency, the extent of any related travel advisories and restrictions implemented,
the impact of such public health emergency on overall supply and demand, goods
and services, investor liquidity, consumer confidence and levels of economic
activity and the extent of its disruption to important global, regional and local supply
chains and economic markets, all of which are highly uncertain and cannot be
predicted. The effects of a public health emergency may materially and adversely
impact the value and performance of the investments held in any client accounts as
well as the ability of IAMJ to source, manage and divest investments and achieve
the investment objectives of its clients, all of which could result in significant losses
to such clients. In addition, the operations of IAMJ and/or its affiliates may be
significantly impacted, or even halted, either temporarily or on a long-term basis, as
a result of government quarantine and curfew measures, voluntary and
precautionary restrictions on travel or meetings and other factors related to a public
health emergency, including its potential adverse impact on the health of any such
entity’s personnel.
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IAMJ
IAMJ is an indirect, wholly-owned subsidiary of Invesco Ltd. Invesco Ltd is publicly
traded on the New York Stock Exchange as IVZ.
Affiliations
Brokers/Dealers By virtue of Registrant’s common ownership by Invesco Ltd, IAMJ is a related person to
the broker/dealer listed below. From time to time this broker/dealer may distribute
funds, limited partnerships or other private placement offerings IAMJ advises or
sub-advises.
INVESCO DISTRIBUTORS, INC
INVESCO CAPITAL MARKETS, INC
Investment Advisers From time to time IAMJ or its related parties may have arrangements with the below
listed investment advisers associated with creating, sponsoring, advising, owning, or
providing services to mutual funds or separate accounts that may be material to the
IAMJ’s advisory business or its clients.
The following are the affiliated SEC Registered Investment Advisors under the common
ownership of Invesco Ltd:
FOUR RIVERS INVESTMENT MANAGEMENT CO., LTD.
HARBOURVIEW ASSET MANAGEMENT CORPORATION
INVESCO ADVISORS, INC
INVESCO ASSET MANAGEMENT (INDIA) PVT LTD
INVESCO ASSET MANAGEMENT DEUTSCHLAND GMBH
INVESCO ASSET MANAGEMENT LTD.
INVESCO ASSET MANAGEMENT SA
INVESCO CANADA LTD
INVESCO CAPITAL MANAGEMENT LLC
INVESCO DISTRIBUTORS INC
INVESCO EUROPEAN RR L.P.
INVESCO FUND MANAGERS LTD
INVESCO GLOBAL REAL ESTATE ASIA PACIFIC, INC.
INVESCO HONG KONG LIMITED
INVESCO INVESTMENT ADVISERS LLC
INVESCO INVESTMENT MANAGEMENT LTD
INVESCO MANAGED ACCOUNTS, LLC
INVESCO MANAGEMENT S.A.
INVESCO PRIVATE CAPITAL, INC.
INVESCO REAL ESTATE MANAGEMENT S.À R.L.INVESCO RR FUND L.P.
INVESCO SENIOR SECURED MANAGEMENT INC
INVESCO SPECIALIZED PRODUC TS, LLC
INVESCO TRUST COMPANY
IRE (CAYMAN) LIMITED
JEMSTEP, INC.
OPPENHEIMERFUNDS INC
WL ROSS & CO. LLC
Insurance Company or Agency/Trust Company Under the common ownership of Invesco Ltd, IAMJ is also a related person to the
affiliated SEC Registered companies below.
INVESCO INSURANCE AGENCY, INC.
INVESCO PENSIONS LTD
Conflict of Interest The high quality of the service provision is not always the better performance of the
client asset but the total service including other service, e.g., the efficient and correct
operations, proper trade monitoring, etc. In principle, we should prioritize the customer’s
interests and effort to maximize their interest. We can realize the above service by the
better performance of client asset, the efficient operations, the proper risk management,
the better customer service as well as the compliance with the laws and regulations and
the risk management.
As described above, for the better service provision, it is important to the better
performance, the compliance with laws and regulations, and the establishment of the
risk management of the risk management but in considering the maximization of the
investors’ interests. It is very vital to protect the conflicts of interests.
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Personal Trading
Code of Ethics
The employees of IAMJ have committed to a Code of Ethics which is approved by
Invesco Ltd. IAMJ will provide a copy of the Code of Ethics to a client upon request.
Participation or Interest in Client Transactions
IAMJ and/or its related persons may recommend to clients assets be invested in shares
of investment companies or other collective investment schemes of which IAMJ or its
affiliates act as investment advisor. In such cases, IAMJ will consider adjustment of
investment management fee.
Furthermore, it is possible that the Applicant or its affiliates may invest their own capital
in securities or investment products in which clients may also have made investment.
But in normal course of business, the Applicant does not operate proprietary trading
accounts.
If authorized by client, the Applicant may engage any of its affiliates to perform any
services deemed necessary or appropriate in connection with the investment
management services provided by the Applicant. Such engagements, including fee
payments, are required to be on arms-length terms.
The Applicant has a Code of Ethics and internal policy designed to promote high ethical
and professional standards and prevent conflicts of interest.
Personal Trading
All IAMJ’s employees are required to adhere to the rule of Personal Trading where it is
stated that the employees of IAMJ must obtain pre-clearance from the Compliance
Department and submit the completed Personal Trading form to the Head of
Compliance (or his deputy) prior to entering and order for a securities transaction for
their accounts including their related accounts.
As a basic rule, an employee should not buy or sell for himself or permit any related
account to buy or sell a security or any instrument which is (a) on the same day as any
client account is trading the stock; (b) where he knows that the sale or purchase of the
securities are being considered for a client account; (c) within 3 business days before or
after the day on which any client account trades in the same security or instrument or in
a security convertible into or exchangeable for such security or instrument (including
options) on transactions.
The personal trading is reviewed by Compliance Department ensure that the personal
trading of employees does not affect the markets, and conflict of interest against client
asset.
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Selecting Brokerage Firms
We will only place trades with broker-dealers approved by Risk Management
Committee as describe below. To evaluate and authorize brokers, we have “Tokyo
Trading Oversight Committee (hereafter “TTOC”)” in IAMJ, which consists of Chief
Investment Officer (CIO) and representatives of Trading, Investment, Operations,
Product Management, Performance Measurement Analytics and Report and
Compliance divisions. TTOC evaluates brokers and reviews approved broker’s list on
a quarterly basis. And then, with an approval by Risk Management Committee in IAMJ,
the brokers are officially approved and added on the approved broker’s list.
IAMJ uses multiple criteria to evaluate brokers and allocate the trades accordingly.
The criteria include quality of research, execution ability, level of operational ability,
technology infrastructure, etc. The ranking of brokers is determined based on the
scoring system where the scores are given by members of TTOC. The traders will
place trades according to the trade allocation plan based on these scores.
Criteria for Approval
In order to be an authorized broker, it must meet at least two of the following criteria;
The capital adequacy ratio of the broker should be no less than 250% or the capital
ratio should be no less than 8% of the BIS Standard.
Credit rating should be above A1 (inclusive) if the broker is given rating by rating
agencies.
The broker should be a Trading Participants of the Japan Exchange Group.
Broker’s research and execution capabilities should meet the internal standard and
its operational platform is well established.
Best Execution
While neither the Financial Services Agency (“FSA”) nor the domestic regulatory
organizations have formally defined “best execution”, Invesco considers it is our
obligation to seek the best execution for clients. Best execution at IAMJ means the
quality of execution and it is not determined solely by level of commission or price of
securities. The decision of how and when to execute an order involves complicated
judgments requiring consideration over a number of factors including the following;
Price
Cost
Speed
Liquidity
Order characteristics
Any other considerations relating to the execution of the order
Soft Dollars
Accounts to which soft dollar applied are strictly specified by clients' agreements. In
principle, the soft dollars are prohibited to Japanese clients’ accounts.
Order Aggregation
Where it has been decided to purchase a security for more than one portfolio, the order
will be aggregated for transmission to the broker and then must be allocated between
each individual portfolio so as to be fair between portfolios and reasonable in the
interests of each portfolio. Allocation must be done by the dealers by means of auto
pro-rata calculation done by the IAMJ’s trading system-Charles River Developments
Investment Management System. Partially filled orders will be allocated among all
aggregated accounts on pro-rata based on order size.
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Periodic Reviews
Account reviews are formally conducted monthly in the Investment Risk Management
Committee, chaired by Head of Risk Management Group, with CIO, Head of Investment,
Head of Compliance, and Head of Product Services.
Review Triggers
While the reviews are regularly conducted on monthly basis, if the changes in market
environment or conditions are deemed to require special reviews, the committee can be
held as necessarily.
Regular Reports
The client who signs the Investment Management Agreement with IAMJ and is
regarded as a general investor under Japan’s Financial Instruments and Exchange Act
will receive account statements from IAMJ on a monthly basis. Other regular reports
are also available upon request.
Investor who invests in a J-fund managed by IAMJ will receive the investment report
after investment period.
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Referrals
IAMJ has received a number of client referrals over the years. The referrals came from
current clients, independent financial consultants, employees, personal friends of
employees and other similar sources. The firm does not compensate referring parties
for these referrals.
Other Compensation
IAMJ will enter into agreements with licensed broker and bank for distribution of J-fund.
Compensation will be provided to these entities with regards to their services.
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Custody of client funds or securities
The firm does not have custody of U.S. client or investor funds or securities so therefore
this section is not applicable to the firm.
Discretionary Authority for Trading
IAMJ accepts discretionary authority to manage securities accounts on behalf of clients
who sign the Investment Management Agreement with IAMJ. IAMJ has the authority
to determine the securities to be bought or sold, and the amount of the securities to be
bought or sold. In some cases, clients may place limitations such as setting a block or
requesting a prior client approval when trading some particular stock. These limitations
are all agreed between IAMJ and its clients and stated out on the Investment
Management Agreement before executing the agreement.
Discretionary trading authority facilitates placing trades in clients’ accounts on their
behalf so that IAMJ may promptly implement the investment policy that the clients have
approved in writing.
Limited Power of Attorney
The signing of the Investment Management Agreements is a discretionary Authorization
for trading purpose.
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Proxy Votes
1. Our Principles on Proxy Voting • The sole objective of proxy voting at IAMJ is to exercise voting rights, based on
its fiduciary duties, recognizing the importance of corporate governance, in
order to maximize the long-term benefits of clients (investors) or the
beneficiaries. In exercising the proxy voting rights, IAMJ acts solely in the
benefits of the clients (investors) or the beneficiaries and not in the benefits of
the third parties or of its own. When investing in stocks, it must be monitored by
the shareholders at all times whether the companies invested are appropriately
managed in light of their economic interests. From this point of view, IAMJ has
stipulated the proxy voting rules and set up the comprehensive proxy voting
procedure and structure.
2. Proxy Voting Structure and Process • IAMJ has established the Responsible Investment Committee and set out the
Proxy Voting Guidelines in order to appropriately exercise proxy voting rights
based on our policy principles on proxy voting above, The Responsible
Investment Committee consists of Chief Investment Officer as chairman, Head
of Investments, Corporate Governance Officer, Portfolio Managers appointed
by the chairman, and the other committee members including the members of
Client Reporting and Compliance Department. In principle, decisions related to
exercising of proxy voting are made by Portfolio Managers in accordance with
the Proxy Voting Guidelines.
• In exercising proxy voting, advice from an outside professional proxy voting
service may be retained in accordance with our Proxy Voting Guidelines.
3. The Outline of Proxy Voting Guidelines • In our Proxy Voting Guidelines, in order to appropriately exercise proxy voting,
the guidelines are set out to assist decisions on various individual agenda
items. Each agenda item shall be scrutinized according to those guidelines to
make a decision on proxy voting.
• The main criteria of the Proxy Voting Guideline are as following
(1) Items on Financial Statements
Is Interest Appropriation/Loss Disposal recognized on reasonable grounds?
(2) Appointments of Directors/Statutory Auditors
1) Are there not any doubts on the independence of the nominees?
2) Is any violation of laws or an anti-social act not recognized?
3) Given poor business performance, are business improvement efforts
insufficient?
(3) Items related to Corporate Governance
1） Is there any possibility of a limitation to the shareholder’s rights due to
amendments to articles of incorporation as such.
(4) Director Compensation and Retirement Benefits
1) In accordance with business performance, is any payment of inappropriate
executive remuneration/retirement benefits not made?
2) Is any plan introduced such as a stock option plan not impaired the interests
of the existing shareholders?
(5) Equity Financing Policy
Is the policy not recognized as unreasonable in light of an increase in the
economic interests of the shareholders?
(6) Items related to anti-takeover measures
Is there not any introduction of anti-takeover measures which impair the
interests of shareholders?
(7) Others
1) What are the impacts on the shareholder value of the agenda items related
to social, environmental, and political issues?
2) Is the inappropriate disclosure not impaired the shareholders’ economic
interests?
3) Abstain voting for the company which gives rise to conflict of interests
4) Does the shareholder’s proposal contribute to an increase in the
shareholders’ economic interests?
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Financial Condition
IAMJ does not have any financial impairment that will preclude the firm from meeting
contractual commitments to clients.
A balance sheet is not required to be provided because IAMJ does not serve as a
custodian for the client funds or securities.
Prospectus of J-fund that is public placed includes audited financial statement of IAMJ.
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