Ex-Goldman Executive Finds Value in Japan Funeral Parlors, Daycare Centers

Yuki Hagiwara, Bloomberg News

A casket is seen inside a room at Flying Home funeral services, an affiliate of Ang Chin Moh Funeral Directors Pte., in Singapore, on Thursday, Jan. 23, 2020. The business of death and dying has long been taboo across much of Asia; cemeteries and nursing homes near residential areas are shunned, while investors attract gossip. But a rising pool of wealthy Asian families and philanthropists are defying social norms, boosting investments and educational campaigns to improve and destigmatize the industry. Photographer: Wei Leng Tay/Bloomberg , Bloomberg

(Bloomberg) -- A former Goldman Sachs Group Inc. executive is expanding assets of a fund that invests in undervalued Japanese companies from funeral parlors to daycare operators.

With Japanese stocks at a 34-year high, Investment Lab Co. founder Naohide Une seeks to provide returns to investors at home and abroad with bets on smaller equities that are harder to reach as investment targets.

Gains in Japanese equities have been led by a handful of large-cap stocks, and strategists have pointed to the need to broaden the scope of investments. Une says there are about 3,000 Japanese companies that are outside the scope of research by major securities firms, and he is focusing on selecting those with growth potential.

Investment Lab currently manages more than 10 billion yen ($68 million) in assets. It wants to increase the amount to about $400 million within two years, Une said in an interview. He is accepting money from domestic and foreign institutional investors. The fund recorded positive returns for 14 consecutive months until last October, Une said.

Une founded Tokyo-based Investment Lab in 2020. He has previously led the Asian derivatives trading team at Goldman Sachs in Japan, and served as a managing executive officer at Japan Post Bank Co.

His investment approach is characterized by thorough research. Une said his firm conducts as many as 2,500 interviews and surveys with companies annually to identify growth potential in light of the economic environment and policy trends.

Here are some of the companies Investment Lab has picked:

In light of Japan’s aging population, the fund invested in Kosaido Holdings Co., which is responsible for about 60% of cremations in the 23 wards of Tokyo. The share price has more than tripled since Investment Lab started buying in 2022.
Taking advantage of the government’s measures to address the declining birthrate, it invested in JP Holdings Inc., which is engaged in childcare-related businesses. The stock has almost doubled since the end of 2021.
Central Automotive Products Ltd., a developer of body coating materials for automobiles, is expected to benefit from the trend of people owning cars for longer. Its stock price has doubled in the past year.