Although completely customised for the Japanese equity market, our Japan Core Value strategy is based on an approach similar to that we have successfully applied to US equities for almost 20 years. In particular, we view the Tokyo Stock Exchange as a fast-moving market where structuring intuition and eliminating emotion are essential to achieve superior performance results. To guarantee this discipline, we apply a consistent process, which combines the speed and discipline of computer processing with the skills and adaptability of human judgment, supported by a deep knowledge of the Japanese culture.

Our "Japan Core Value" investment strategy involves active stock selection, driven by the output of a proprietary, extensively researched, quantitative model. A disciplined judgmental overlay by Japanese market specialists leads to the final decision.

This process capitalises on the key competencies that characterise BNPP AM's Model-driven products:

•  Experience: the first version of our JapanQuant model was developed in the late 1980's, and took advantage of experience gained during the development of the US stock selection model. The approach was implemented in 1991, and upgrades were then introduced regularly on the basis of further research.

•  Pragmatism: although our approach has a lot of principles in common with its "sister strategy" on US equities, both the model and the other aspects of the process are completely specific to the Japanese market. In particular, the model is redesigned from scratch, and its indicators are all different from those used in the US.

•  Technical excellence: our approach to the development of the strategy involves going into every detail, and ensuring that every choice is based on well documented research. Technical challenges, such as the quality of data or the length of backtests, are systematically addressed to neutralise any potential impact on the resulting model.

This makes the resulting product quite unique:

• Thanks to extensive backtests, our quantitative model can be expected to react properly in most market conditions. It serves as the backbone of the strategy, and, contrary to many models which focus on alpha generation, it integrates portfolio construction.



• Risk is taken into account in an original manner, which starts as early as the development stage of the model, and relies primarily on the way the various indicators interact to generate messages. As a result, our model is less vulnerable to the factors which often cause discrepancies between predicted risk and actual achievements in other approaches.



• Our process brings together the strengths of two approaches that are not usually combined in a single strategy. Thanks to its focus on facts, the model protects the portfolio against emotional, inconsistent decisions. Human experience brings judgment's adaptability to exceptional situations, and enhances the interpretation of backtests during the development phase. Thanks to the team's integration, all professionals whose role impacts the process work seamlessly together and understand each other's contribution.