K2 Asset Management Ltd., a listed Australian absolute return fund managing about A$950 million ($943 million) in assets, is looking to invest with “a bit more vigor” in Japan, where stock valuations stand to benefit from an increase in global inflation.
Chief Investment Officer Mark Newman made the following remarks in an telephone interview from his office in Melbourne today.
On global inflation and Japan:
With “quantitative easing in Europe and America and Japan, one of the fears of that is inflation.
‘‘One country that could do with some inflation is Japan. So Japan could be a beneficiary of the quantitative easing in the west, in terms of seeing some inflationary expectations reemerge in the Japanese economy, which wouldn’t be a negative factor for them.
‘‘That might be the trigger, along with a weaker domestic currency, for Japan as an equity region to start doing better. It’s a country we’re looking at for our international fund with a bit more vigor than we’ve done in the past.”
On K2’s performance in the six months through December 31:
“We had a pretty good year. For the first half of the financial year, the Asian fund is up 14.1 percent after fees, while the market was up about 4.8 percent.
‘‘The Australian fund was up 13 percent for the half year, and the market was up 14.5 percent.
‘‘International up 17.6 percent,’’ and its benchmark index in Australian dollars rose 2.6 percent.
‘‘At the moment, we’re pretty long across the board. The Asian fund is about 88 percent long, the Australian fund is about 85 percent and international is 91 percent.’’
On the Australian dollar:
‘‘We’ve also had a positive view on the Australian dollar and been pretty much 100 percent hedged back to A-dollars for our international and Asian funds.
‘‘We believe that when currencies are in a strong environment they tend to overshoot on the upside.’’
China will ‘‘manufacture a soft landing, and as we see the tightening measures on property and interest rates and some appreciation of the renminbi, the economy will soften and give the government in China a bit more confidence in controlling inflation.’’