(TYO:8601). This investment was sourced by Senior Research Analyst Jakub Rehor and initially purchased in the Third Avenue International Value Fund in late 2011 and discussed in that Fund's first quarter shareholder letter. Daiwa is the second largest Japanese brokerage. The company has a strong and profitable retail business and a growing asset management business. Recently, the company has been restructuring its wholesale business, and the results have been reflected in two consecutive profitable quarters. Daiwa's track record is reasonable, as it largely avoided trouble during the financial crises, and it has a very strong financial position with a 27.4% capital adequacy ratio versus a required minimum of 8%. Importantly, the company does not focus on proprietary trading, unlike many of its global peers. While the company's primary focus is Japan, it also offers comprehensive stock research pan-Asia. Shares of Daiwa were purchased at a 27% discount to June 30th tangible book value and more than a 35% discount to estimated net asset value.
From Third Avenue's third-quarter letter, by Ian Lapey, portfolio manager.