Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan Japanese. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
JFJ’s highly active approach has seen a number of new, high-conviction growth businesses added to the portfolio amid attractive valuations…
Overview

JPMorgan Japanese (JFJ), led by Nicholas Weindling and Miyako Urabe, is one of the largest and oldest closed-end funds focused on Japanese equities. The managers target innovative, high-quality growth Japanese companies, boasting strong balance sheets and competitive positions in their respective industries.

Nicholas argues this is the most exciting time in Japanese markets over the last two decades, as rising consumer spending, corporate governance changes, inflation and transformative growth trends are strengthening the economy and widening the pool of opportunities in the equity market. The managers have taken advantage of this and added a number of new businesses to the portfolio. For instance, Japan Material was added as it stands to gain from the de-globalisation trend intended to diversify and secure supply chains by relocating manufacturing within Japan (see Portfolio). Furthermore, ongoing improvements deriving from Japan’s corporate governance push have resulted in Secom being added to the portfolio, given its announced buy-backs for the first time in many years and has been able to hike prices.

Stylistically speaking, JFJ is the most growth-oriented trust in the AIC Japan sector, a strategy that’s led to strong performance when growth investing has been in vogue but underperformance when the lower quality and/or more cyclically sensitive stocks are driving the market. The latter has been the case over the last three years, denting JFJ’s longer-term performance numbers. However, since the last quarter of 2023 performance has picked up, with stock like ASICS, Tokyo Electron and Shin-Etsu Chemical driving returns (see Performance).

This difficult run of performance has seen JFJ’s discount widen, at times, to double digits, although it has come in slightly over the past 12 months. At the time of writing, its Discount is 9.2%, wider than both its five-year average and the sector average.

Kepler View

In our view, JFJ benefits from the managers ability to leverage the experience of a large, on-the-ground team of Japanese analysts to help with research and stock selection. The locally based team can provide valuable insight to markets, including the lesser researched parts, and can often see first-hand a lot of the new ideas and business models that are emerging, such as Osaka Soda (see Portfolio). We think the experience backing JFJ makes it a compelling option for investors looking to access the market via a differentiated portfolio of high-quality growth stocks.

JFJ’s Discount of 9.2%, wider than its own five-year average, may also support the case that this is an attractive entry point for long-term investors. However, we’d point to the fact that this is a high-growth strategy, so investors should consider JFJ’s susceptibility to short-term volatility, something we’ve seen in recent years as growth investing as fallen out of favour (see Performance). Despite the recent challenges, the managers remain optimistic about Japan’s economy, citing the improvements from the corporate governance reforms, attractive valuations and developments in key transformative growth areas, as factors underpinning their optimism. We think that a combination of these factors paints an encouraging economic outlook for Japan and could positively impact JFJ’s portfolio and discount.

Bull

  • On-the-ground research team offer good coverage of the market and are an advantage with stock selection
  • Current discount may present an attractive entry point for long-term investors
  • Japanese equities look attractively valued versus global peers

Bear

  • Strong style bias and active approach may lead to periods of underperformance
  • Use of gearing can magnify the losses in a market downturn
  • Investors take single-country political, currency and economic risk
Continue to Portfolio

Fund History

18 Jun 2024 Fund Analysis
JFJ’s highly active approach has seen a number of new, high-conviction growth businesses added to the portfolio amid attractive valuations…
01 May 2024 From riches to rags to riches, is this time really different for Japan?
Japan’s decade-long corporate governance push is finally leading to significant improvements to underlying Japanese businesses…
27 Sep 2023 Ohayō Japan!
Our analysts discuss what they think may be a new dawn for the Land of the Rising Sun...
17 Aug 2023 Fund Analysis
The valuation of JFJ’s high-growth portfolio looks cheaper after last year’s sell-off…
02 Mar 2023 The Devil’s in the demographics
China’s population is in decline - should it turn east or west for inspiration..?
28 Feb 2023 Fund Analysis
JFJ’s portfolio of high-growth businesses looks cheap as sentiment improves…
15 Feb 2023 Lost in translation
We argue Japanese equities look attractive on both a short and long-term view…
25 May 2022 Fund Analysis
Recent markets may offer an opportunity to ‘buy the dip’ in JFJ’s attractive growth opportunities…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
22 Sep 2021 Fund Analysis
JFJ trades at an attractively wide discount, and this could be a chance to ‘buy the dip’…
31 Mar 2021 Fund Analysis
JFJ continues to be at the heart of Japan’s new growth, with a portfolio of quality growth stocks that has delivered long term outperformance…
28 Jan 2021 Big game
Two of our analysts go head-to-head on the question of whether SMT’s stampede can continue…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
02 Dec 2020 Can you teach an old dog new tricks?
Cheap companies in Japan are drowning in what cheap companies elsewhere would kill for: buckets of cash…
05 Nov 2020 Fund Analysis
JFJ has outperformed post COVID-19 through its portfolio of Japanese growth stocks but remains at a discount….
20 May 2020 Riding for a fall?
We consider the risks which could derail the multi-year tech boom…
19 Feb 2020 Fund Analysis
JFJ invests in high-quality Japanese companies with structural growth drivers…
28 Nov 2019 Is there a generational opportunity in Japan?
Two of our analysts go head-to-head, arguing the case for Japan...
24 Jul 2019 Fool's gold?
We examine the relationship between how much a fund costs and how it performs, with surprising results...
22 May 2019 On a roll
As Western economies show signs of their own 'Japanification', we explore the Japanese industries poised to take advantage of this change...
10 Apr 2019 Fund Analysis
JPMorgan Japanese (JFJ) aims to maximise capital growth from a portfolio of high-quality companies in Japan...
06 Sep 2018 Bullseye
The third arrow of Shinzo Abe's grand plan, corporate reform, puts undervalued Japanese equities in a very attractive position...
05 Sep 2018 Fund Analysis
JPMorgan Japanese Investment Trust explores investment opportunities across the market cap spectrum, including mid-small cap stocks with high growth characteristics...
14 Dec 2017 Race to the bottom
Ahead of the new PRIIPS rules we examine the progress investment trust boards are making in reducing costs...
14 Dec 2017 Fund Analysis
A growth-orientated Japan equity trust run by a highly-resourced team that has very low operational costs
View all

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