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
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Overview

JPMorgan Japanese (JFJ) continues to offer investors a portfolio of Japanese equities picked through bottom-up stock picking. Run by Nicholas Weindling and Miyako Urabe, with Nicholas recently passing his ten-year anniversary as manager, the portfolio is made up of quality growth stocks across the market capitalisation spectrum, leveraging heavily on the managers’ understanding of Japan’s secular trends. Portfolio companies are often at the forefront of the solutions to Japan’s demographic issues and environment challenges, or simply offer some of the fastest growing prospects amongst Japan’s major brands or in the digitisation and automation sectors.

Thanks to its quality growth bias, JFJ has been able to generate very strong performance over 2020, capitalising on the momentum behind the COVID-19 ‘winners’ like ecommerce and online services. However, 2021 so far has seen a wider rotation out of quality growth and into recovery and value stocks, companies which often lack the long-term structural growth opportunities of JFJ’s holdings. Despite a brief period of underperformance from the start of 2021, JFJ has outperformed the AIC Japan peer group average and its benchmark over the longer term.

JFJ continues to have exceptionally strong ESG credentials, having been rated as high by Morningstar (placing it in the top 10% of its peers). This rating can be attributed in part to the team’s understanding of the governance issues plaguing many Japanese companies, as well as their recent investments in a renewable energy provider, a new ‘environmental’ thematic allocation for JFJ. JFJ has the lowest OCF in the sector, at 0.65%.

Kepler View

In our view JFJ continues to offer one of the best ways to tap into the domestic Japanese market, investing at the heart of Japan’s new growth opportunities. The team have a strong track record of successfully identifying the major secular trends driving the economy, which has translated to five years of outperformance of both the AIC Japan peer group and benchmark. While it has underperformed in the near term, this is probably an unavoidable consequence of quality growth investing and JFJ’s managers remain confident that their long-term view to secular growth investing will return to outperformance, an opinion also held by us.

Over the years JFJ has largely remained consistent in the sectoral trends which underpin its portfolio, though we are excited by its recent addition of an environmental theme. Not only does it further enhance JFJ’s already strong ESG credentials, but it also is evidence of the flexibility of the team and their awareness of the changing market environment in both Japan and abroad, especially important as we enter a post COVID-19 economy.

Investors should be conscious that the combination of a high level of gearing, exposure to small cap stocks, and a clear quality growth bias can enhance JFJ’s volatility. This has played out recently with the market’s rotation into value and cyclical stocks at the expense of quality growth as it begins to price in a post-pandemic recovery, enhancing the downside volatility for JFJ. However we believe JFJ’s returns more than compensate for its risk, with JFJ having the highest Sharpe ratio of its peers over the last three years and below average beta.

Bull
Bear
Dedicated to investing in the secular growth trends underpinning the Japanese economy
Has recently underperformed due to rotation into value and cyclical stocks
Long-term track record of outperformance
The use of gearing can amplify losses
Well-resourced team located in Tokyo, providing invaluable local knowledge
A failure of one sectoral factor to materialise will impact multiple holdings
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
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