Japan’s hidden treasure: unlocking the value of idle capital
1 OCT, 2026
Undervalued, under-owned, cash-rich large-cap companies will be at the forefront of the ongoing corporate governance revolution as the focus shifts to optimising excess capital to generate stronger shareholder returns.
Since the Tokyo Stock Exchange (‘TSE’) introduced new guidelines in 2023, share buybacks, management buyouts and higher dividend payouts have surged, as company boards increasingly prioritise restructuring on the corporate agenda. But as the governance revolution evolves, capital allocation has taken centre stage as companies unwind cross-shareholdings and seek to make better use of dormant assets. Management teams are increasingly being asked not only what they own, but also why they own it and how they can generate better returns for shareholders. And for many companies, the catalyst is already in motion.
Nicolò Vezzoso, joint portfolio manager of the newly launched Zennor Himawari Fund, says: Japan’s corporate revolution is more than just about share buybacks or M&A. Value isn’t missing – it’s hidden. Exceptional excess cash and non-core assets in Japan offer a clear path to earnings growth and multiple expansion, if capital is put to work wisely. The discounts on offer reflect trapped capital, not poor businesses.
This heightened capital-allocation phase of the corporate governance revolution comes as Japan consigns decades of deflation to the history books. Wages are rising and, for the first time, companies are raising prices. With a stabilising currency and renewed foreign interest, especially from the US, large-cap Japanese companies are in a favourable environment. Many still trade below intrinsic value, even as their business fundamentals improve.
The new Zennor Japan Himawari* Fund offers investors direct access to this hidden value, focusing on cash-rich misunderstood companies among Japan’s 350 largest listed businesses. Unconstrained by benchmarks and drawing on their extensive experience investing in Japan, the Himawari Fund’s managers, CIO David Mitchinson and portfolio manager Nicolò Vezzoso, have identified a concentrated portfolio of mispriced companies that have been overlooked or have underachieved, but with a clear catalyst for positive change.
Mitchinson adds that many of Japan’s top-350 companies are misunderstood or ignored due to limited analyst coverage. Large global funds focus on the top 30 Japanese stocks, leaving many high-potential businesses overlooked. Some companies with $6 billion market caps have no analyst coverage at all, which underlines the untapped value in this market.
With almost USD 2 billion in assets under management and a robust infrastructure, backed by a board of directors with decades of investing experience in Japan, Zennor’s new fund reinforces the manager’s ambitions to expand its product range. Founded by James Salter and David Mitchinson in 2020, Zennor launched the IUP Zennor Japan Fund** in February 2021, the WS Japan Equity Income Fund in April 2023 and the micro-cap-focused RAIF***, the Zennor Japan Special Situations Fund, in July 2024.
* Himawari means sunflower, a symbol of positivity and optimism
** The Fund is now closed to new investors to protect returns and preserve access to smaller-cap opportunities
