Nov. 11 (Bloomberg) -- Einosuke Yoshino, a former head of Capital Group Cos. in Tokyo, led a 32 percent return for the Commons 30 Fund this year by betting on growth at 30 Japanese companies including Komatsu Ltd.

The fund, run by Commons Asset Management Inc., started on Jan. 19 this year and has raised more than 400 million yen ($4.5 million), mostly from individual investors in Japan through direct marketing, said Tetsuro Ii, 49, president of the Tokyo- based firm. It aims to increase assets to more than 50 billion yen in five years, Ii said.

Commons 30 has outperformed the benchmark Topix index’s 6.5 percent gain from its inception by limiting investments to companies looking overseas for growth. That success may help Yoshino take a bigger slice of the 1,440 trillion yen in financial assets held by individuals in Japan, where interest rates on deposits in banks are almost zero.

“You can no longer bet on companies that are simply doing well in Japan,” Yoshino, 73, said in an interview in Tokyo yesterday. “There are still opportunities out there and I want the investors to realize the benefits of investing for the longer term.”

Yoshino left the Tokyo office of Capital Group, the Los Angeles-based manager of American Funds, in 2003 after working for the firm for 20 years. He aims to match the performance of his former employer, whose flagship fund has had an average annual return of 12 percent in the past 75 years.

Difficult Sell

“Trading for the short-term or betting on very selective group of stocks like Yoshino is doing seems to be the only way nowadays to make money in Japan,” said Mitsushige Akino, who oversees about $645 million as chief investment officer at Tokyo-based Ichiyoshi Investment Management Co. “It’s difficult to lure long-term money to Japan until we get the economic growth and there aren’t that many Japanese companies that look to stand up in the global competition.”

Yoshino said he began scouting for stocks two years before the launch of Commons 30. He’s divided companies into 10 groups, ranging from environmental infrastructure firms such as Komatsu, the world’s second-biggest maker of construction equipment, to retailers including Shiseido Co. and K’s Holdings Corp. Commons 30 hasn’t invested in financial or property-related companies.

The fund doesn’t select stocks based on market capitalization. While half its holdings are in companies with a market value of more than 500 billion yen, it also owns stocks with valuations of about 100 billion yen, according to the firm.

Komatsu, Shiseido

Yoshino said he likes that Komatsu and Shiseido are expanding overseas in markets such as China. Shares of Komatsu, whose Chinese sales accounted for 12 percent of its revenue as of the end of March according to Bloomberg data, have gained 66 percent this year, benefiting from the nation’s stimulus plan.

Tokyo-based Shiseido is expanding in China and other overseas countries to raise the proportion of its foreign sales to 50 percent by 2017, from 38 percent last fiscal year, according to the company. Shiseido entered China in 1981 and is expanding its distribution network into the nation’s inland provinces. Its stock has slipped 9.5 percent this year.

To diversify, Yoshino also invests in companies such as K’s Holdings, which is capturing demand at home by focusing on bigger and newer stores. K’s stock has jumped 89 percent in 2009.

As part of its efforts to attract a wide range of investors, Commons Asset is championing what the firm calls “friendly activism” by setting up meetings between his clients and the companies their money goes into.

“People tend to think that there is no opportunity to invest in Japan if there is no economic growth,” said Ii. “But you’ve got to remember that there are Japanese companies out there that can benefit from overseas demand and that’s what we want to invest in.”

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

Last Updated: November 11, 2009 01:49 EST