Anja Balfour tells Ian Fraser how she held her nerve
ANJA Balfour, who manages £400 million (€591m) of Japanese retail and institutional funds at Axa Framlington, learnt the importance of keeping her cool amid collapsing stock markets on Black Monday.
Then working as a temp in a City law firm, she allowed the fear that was sweeping through the Square Mile to sway her judgment. She used a phone box – “yes it was the days before mobiles” – to liquidate her holdings in a couple of UK unit trusts. “That provided a great lesson to me,” says Ms Balfour, “which is that savings markets also recover. It also taught me not to panic.”
It is a lesson that has stood Ms Balfour in good stead over a 17-year career managing Japanese equities at Ivory & Sime, Stewart Ivory, Baillie Gifford and now Axa Framlington. Ms Balfour, 43, again needed strong nerves four years ago, when she was still at Baillie Gifford. After a 13-year bear market – and despite having peaked at 38,915 points in December 1989 – the Nikkei 225 plunged to a fresh low of 7,607 in April 2003.
“Some of the Japanese banks looked as if they might go under,” says Ms Balfour. However she held her nerve and, identifying the bottoming out of the market as a buying opportunity, successfully built up stakes in some of the country’s better banks.
The Japanese market subsequently picked up and in 2005 the Nikkei climbed by an impressive 46%. Even though the market has since plateaued, Ms Balfour – who was headhunted to replace David Mitchinson at Axa Framlington in September 2004 – has not allowed this to dent her confidence. “I still believe that we are in the early stages of a multi-year bull market in Japan,” she says. “Within a bull market, it’s common to get periods of up to 24 months of sideways movement.”
Her first step on taking over the reins at the £183m Axa Framlington Japan Fund was to unwind many of Mitchinson’s holdings in smaller companies, ahead of a big sell-off of smaller companies in 2005-06. She has latterly been using the market doldrums “to pick up undervalued stocks and to buy companies that I’ve always liked but which have been too expensive in the past.”
Since taking profits on computer games company Nintendo in late February, she has bought into the oil and gas company Impex and social-networking website Dena. She has also boosted the Axa Framlington Japan Fund’s exposure to large-cap financials.
Ms Balfour believes structural reforms implemented by the former prime minister Junichiro Koizumi in 2002-03 will continue to add impetus to the market. Among other things his government tackled cronyism and obliged Japanese banks to sort out their balance sheets through enforced consolidation. While economic reform is less of a priority for Koizumi’s successor, Ms Balfour welcomes Shinzo Abe’s commitment to improving relations with neighbouring countries, as it could help stimulate exports of Japanese goods and intellectual property.
She also points to a predicted surge in M&A activity. This is expected to be sparked by a legislative change that was introduced on May 1, which allows overseas businesses to issue shares to fund acquisitions of Japanese companies. The heightened threat of overseas takeover is already forcing some indigenous businesses, such as TDK, to re-invent themselves. “It’s making Japanese companies more pro-active and more focused on the bottom line,” she says.
When headhunters first approached Ms Balfour about the Framlington opportunity in 2004, her immediate response was to laugh at their assumption that she would be prepared to drop everything and move to London. They were somewhat taken aback when she told them she would only be interested in the position if Framlington agreed to open an Edinburgh office. Framlington eventually agreed, partly because it wanted Ms Balfour so badly, but also because since it does not believe in enforcing a fixed process on its fund managers it has no great need to house them all in a single building.
She argues that Edinburgh is, in any case, a better place than London for Japanese equity managers to be based, partly because it provides better access to managements. The Scottish city is on the map for investment road-shows and is liked by Japanese bosses because of the presence of large asset managers such as Standard Life Investments – and the proximity of so many golf courses. “Rather than the group lunches we would get in London, we’re able to get one-on-one meetings with the presidents and CEOs.”
Ms Balfour’s first job was with Ivory & Sime (now part of F&C) in 1989. But she found the culture there to be “male dominated, aggressive and back-stabbing” and was only too happy to move to Stewart Ivory in 1991, which she says had a much more “collegiate” feel. After nine years there, Ms Balfour was a casualty of the privately-owned firm’s decision to sell itself to the Australian group Colonial First State, which led to the removal of its Japan desk to London.
Her next move was to Edinburgh-based Baillie Gifford where Ms Balfour claims she always felt like an outsider, as most of BG’s fund managers had spent their entire career there. It therefore came as some relief when she was approached by Framlington, a firm that places much more value on individual decision-making and flair. After meetings with some of its fund managers including Nigel Thomas, Balfour says knew there would be a good cultural fit.
Now it seems Framlington may enlarge the Edinburgh operation further, as long as it can find the right calibre of investment managers who want to work there. “The key criteria is the quality of the individual,” says Axa Framlington’s CEO Robert Kyprianou.
Since the Edinburgh office was opened three years ago, Ms Balfour has already been joined by Chisako Hardie, who moved across from SWIP last year to launched a Japan smaller companies fund.
This article was published in the Financial Times’ FTfm section on 28 May 2007