December 3, 2025

Dear Clients,

Every so often, the world feels strange enough to warrant leaving the quiet of Victoria and seeing things up close. This year felt like one of those times. From the return of political volatility to the rise of artificial intelligence and the reordering of global trade, familiar patterns are shifting in ways that demand perspective. That is why, despite our tendency to be selective about events like this, I decided to attend the Goldman Sachs Japan 2025 Conference, an event we would normally skip.

Our firm manages about five hundred million dollars, and while that makes us small by global standards, it also makes us nimble. Independence has its advantages: we can move quickly, think freely, and ignore much of the noise that surrounds modern investing. But independence does not mean isolation, and from time to time it benefits from contact. Executing on our approach occasionally requires us to step back into the herd, deliberately and with purpose, not to follow it, but to test our own positioning against it. Japan was the right place to do that this year.

Why Japan
 
Although we are a Canadian investment manager, our global equity portfolios include companies that operate globally including several based in Japan. Japan is a laboratory for long-term economic themes: a major industrial power confronting population decline, an aging workforce, and decades of monetary experimentation. Understanding how Japanese policymakers, corporations, and investors have responded to these forces helps us think about how similar challenges might play out elsewhere, including here in Canada.
 
Attending the Japan 2025 Conference was not about chasing short-term ideas. It was a chance to test our views against people running some of the most complex businesses in the world and to hear directly from those shaping monetary and industrial policy.
 
Meetings and Moments
 
Over several days we met privately with leaders from firms such as Komatsu, Yamaha, and Takeda Pharmaceuticals. The conversations were polite, precise, and refreshingly free of salesmanship. One CEO opened by apologizing that his English was “only technical,” then proceeded to describe his company’s global supply chain with more clarity than most native speakers could manage.
 
We also sat down with representatives from the Bank of Japan, an experience that reminded me how calm and deliberate central banking can be when not conducted on social media. SoftBank presented its vision for artificial intelligence with characteristic ambition, while OpenAI followed with a far more grounded discussion of what AI can and cannot do.
 
And then there was U.S. Ambassador George Glass, who delivered a surprising and mostly non-diplomatic address. His talk mixed policy commentary with off-the-cuff anecdotes about aircraft carriers and meetings at Trump Tower. It was less a traditional briefing and more a reminder that communication styles in global politics are evolving as quickly as the world they reflect.
 
I was accompanied by my colleague Kevin Jiang, who joined our investment team two years ago. Still early in his career, Kevin’s investing experience at global firms, including Warburg Pincus and the Canada Pension Plan Investment Board, gave him an intuitive grasp of the cultural nuances that shaped many of our meetings. Analysts from London and New York tended to press too bluntly and were often met with carefully non-answers, while analysts from across the Asia–Pacific region were so deferential that their questions rarely uncovered insights. Kevin struck a balance between the two, asking thoughtful, direct questions in a way that opened up the conversation.

I must say, watching this impressed me, as it did analysts with name-tags listing many of the world’s largest hedge funds, who I noticed quietly but urgently taking notes.
 
Lessons from Japan
 
Japan’s history remains a case study in how prosperity can stall when demographics and credit excess collide. The excess of the 1980s was concentrated in real estate, where speculation and easy credit drove land and property prices to extraordinary levels. The Nikkei Index, which peaked near 39,000 in 1989, did not revisit that level until 2024. A 35-year lesson in patience.
 
Population decline constrains growth, and growth is the ultimate engine of long-term portfolio returns. Artificial intelligence introduces a potential offset: productivity. If machines can do more, fewer workers can still produce more output. But the adjustment will not be uniform, and societies will differ in how they distribute the gains. In Japan, where labour shortages are acute, AI is greeted as relief but in North America, it sometimes arrives as anxiety.
 
Implications for Our Portfolios
 
For us, Japan serves as both mirror and warning.
 
Global Trade: Japan depends on imports for nearly everything it makes. Canada has the opposite problem: resources without enough refining and manufacturing capacity. Both models are vulnerable to de-globalization.
 
Artificial Intelligence: Many Japanese companies are deeply involved in AI, supplying components, automation systems, and industrial software critical to the technology’s expansion, yet they remain largely overlooked amid the market’s fixation on Nvidia and other large U.S. chipmakers. We see long-term value in these quieter enablers of global AI adoption and have been increasing exposure selectively.
 
The Long View: Japan reminds us that even strong markets can take decades to recover. Our approach remains focused on long-term growth while ensuring portfolios stay resilient through extended periods of slower returns.
 
Diversification: We are adding selective exposure to high-yield bonds to broaden portfolio return drivers and improve balance when equity markets pause. This modest but meaningful shift will be reflected in the investment policy updates we will be discussing with clients in the coming months.
 
Closing Thoughts

The trip underscored the value of maintaining an independent point of view. Our size allows us to evaluate information without the pressures that often shape larger institutions. Events like this provide an efficient way to compare our assessments with those of industry participants and to confirm whether our existing views require adjustment.
Before returning, we began updating our research, including new profiles on the companies we met as well as revisions to our macro work and portfolio construction models. This process will continue over the coming weeks as we incorporate what is relevant and discard what is not. In the meantime, the purpose of this letter is to outline several of the broader observations that emerged, so clients are aware of the considerations informing our ongoing investment work.
 
I have long believed that managing money quietly and deliberately from Victoria, while occasionally stepping into global centres for perspective, represents a kind of best of both worlds. It allows us to observe global trends without being swept up in them, to stay close enough to the noise to understand it, yet far enough away to think clearly. That balance, and your trust, remain the most important advantages we have.

Sincerely,
Burkett Asset Management Limited