Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by Baillie Gifford. 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
BGFD remains relentlessly focussed on long-term growth opportunities…
Overview

Baillie Gifford Japan (BGFD) owns a portfolio of Japanese equities chosen for their explosive growth prospects. The Japanese Equity Team at Baillie Gifford, with Matt Brett taking the lead manager role since 2018 (see Management), aim to find companies they believe can double in value over five years, and build a portfolio of their highest-conviction ideas, paying no attention to any index.

Matt, deputy manager Praveen Kumar and the team are rigorously active in their approach. Right from the idea-generation stage to the stock-selection decision, the intention is to look through the noise of market movements, investor trends and short-term earnings and valuations to focus on the long term. While the main investment horizon is five years, in practice the average holding period is closer to a decade, with the team having delivered exceptional returns by correctly identifying companies with huge return potential and holding on as they compound their advantages. As we discuss in the Portfolio section, BGFD has more than doubled the returns of the TOPIX Index over the past decade, and is far and away the best-performing Japan trust over that time.

Matt and the team are flexible in their approach to growth. The Japanese market is highly cyclical, and BGFD owns plenty of cyclical companies which meet their long-term growth potential target, with companies like tyre manufacturer Bridgestone sitting alongside tech incubator SoftBank. What unites them is the potential for exceptional returns over the long run.

This year (2021) has been more difficult for BGFD. A preference for value over growth at the start of the year and some stock-specific issues have seen it underperform the market over 12 months. As a result, the shares have fallen from a significant premium to trade close to par.

Analyst's View

BGFD has an exceptional track record, built on an investment process with some highly attractive characteristics. By taking a long-term view and building a highly active portfolio, Matt and his team have increased the chance of outperformance. The team’s execution (i.e. stock selection) has been exceptional over recent decades, with numerous stock picks paying off in a big way and delivering that outperformance.

One reason not all managers take this approach is the fear of active decisions going against them. BGFD has been through a rough patch this year, resulting in some underperformance over a 12-month period. Matt and the team have remained focussed on the long term, looking through any short-term underperformance of their stocks to the long-term growth potential.

The shares de-rating close to par could be an opportunity in our view. While nobody can know whether the trust will repeat its success, if the managers’ view of the return potential in their stocks is correct, even the deflation of a small premium to par would be swamped by the effects of NAV returns.

The use of structural gearing amplifies the return potential. While it also amplifies the sensitivity to market falls, for those who can hold over multiple market cycles the overall effect should be positive, assuming that economies continue to grow.

Bull bear
Exceptional track record
Not a discount opportunity in absolute terms
Highly active approach which brings outperformance potential
Structural gearing can amplify losses on the downside and add volatility
Low OCF relative to that of the peer group
Active share increases potential for both underperformance and outperformance
Continue to Portfolio

Fund History

25 Mar 2022 Slides and Audio: Baillie Gifford Japan
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 16 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
23 Feb 2022 Regime change
Ahead of our spring conference, we ask whether investors need to junk their portfolios and start again…
22 Dec 2021 Fund Analysis
BGFD remains relentlessly focussed on long-term growth opportunities…
17 Dec 2021 Baillie Gifford Japan Trust - Manager Insights
Lead manager of The Baillie Gifford Japan Trust, Matthew Brett, talks about the past year, the current positioning of the portfolio and the opportunities ahead...
03 Dec 2021 Japan’s changed landscape
Over four decades Japan has seen 21 prime ministers come and go. Exporters such as Toyota and Toshiba have flourished but the country has also struggled with debt and deflation. Matthew Brett, manager of The Baillie Gifford Japan Trust, discusses what’s next...
12 May 2021 Japan from a distance
Banned from travelling during the pandemic, Matthew Brett, manager of The Baillie Gifford Japan Trust, explains why distance needn’t mean disadvantage.
07 Nov 2018 The Great British Buffett
New research claims to have identified the secret of Warren Buffett's success; we apply similar principles to find fund managers in the UK with similar characteristics...
05 Sep 2018 Fund Analysis
Baillie Gifford Japan is an ultra-low-turnover all-cap trust that buys quality growth Japanese companies...
05 Sep 2018 Bullseye
The third arrow of Shinzo Abe's grand plan, corporate reform, could have significant implications for undervalued Japanese equities...
View all

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.