Fund Profile

Baillie Gifford Shin Nippon 21 April 2023


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.

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Baillie Gifford Shin Nippon (LON:BGS) is managed by Praveen Kumar, who aims to identify Japanese small caps which have exceptional growth potential, ideally buying them early and holding for years if not decades. BGS has an excellent track record over the longer run, as we discuss in Performance. This has been driven by exceptional returns in individual stocks which have typically been held for a long period – almost a third of the portfolio by weighting has been held for over a decade and in total 60% for over five years.

Praveen focuses exclusively on identifying exceptional companies rather than making calls on market or sector direction. Aided by a deep team of Japanese specialists (see Management), the portfolio he has constructed at present is heavy in niche manufacturers, often with specialised technology, and in digital disruptors. The portfolio displays a sensitivity to the growth factor and tends to be volatile.

Last year saw a significant sell-off in growth stocks as markets reacted to rising interest rate expectations. BGS was not immune, and had a tough year of performance. However, Praveen says the long-term growth outlook for his companies has not deteriorated, but in some cases has actually improved. He views the cheaper portfolio and market as a major opportunity, and the board arranged an extra Gearing facility in March 2023 in order to allow him to take advantage.

BGS has traded on a premium during periods when growth has been in favour and in periods when recent performance has been good, but the shares have fallen to a 10.4% discount to NAV at the time of writing.

Analyst's View

BGS has an unabashedly high-risk, high-return strategy. Managed without reference to a benchmark or market cycles, it is focused on maximising long-term growth by finding companies with exceptional growth opportunities. This has led to excellent returns over the long run but has worked against it over the past 18 months as macro factors have dominated market returns and growth stocks have de-rated. We think there is an argument that markets have already overshot, with the portfolio now trading on a reduced premium versus the market. This, plus the wide discount, means there is potentially an exciting opportunity to invest for the long term.

The Portfolio contains many interesting companies with the potential to dominate international markets, particularly in the technology industries. It also contains multiple companies benefitting from secular changes in Japan, dominating in niches and/or developing new markets. The Japanese economic situation looks interesting at this point in time, with modest inflation, wage growth, and the belated lifting of COVID restrictions all encouraging domestic economic activity. This could be a further boost for BGS’ portfolio in the near future. On the other hand, if global interest rates remain higher for longer, then this will likely weigh on the portfolio’s valuations.

BGS runs with significant gearing, and the highly active approach means there are sector and style biases which bring volatility. But for investors who can stomach that volatility, we think it offers the potential for excellent long-term returns.


  • Excellent track record of adding alpha
  • Highly active and long term in approach which increases alpha-generating potential
  • Has the lowest charges in the sector


  • Tends to be very volatile, with gearing contributing
  • Growth factor is out of favour and this could weigh on the trust in the near future
  • The Japanese market can be very sensitive to a global recession
Continue to Portfolio

Fund History

28 Jun 2024 Baillie Gifford Shin Nippon: Manager Insights
Praveen Kumar, manager of Baillie Gifford Shin Nippon, provides an update on recent performance, observations on the market environment and explains why he remains optimistic...
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…
26 Apr 2024 Fund Analysis
BGS’s portfolio is seeing strong sales growth but looks cheaper and cheaper…
22 Dec 2023 Discovering the unsung superstars of Japanese technology
Fast growing companies comprising Japan’s ‘third wave’ of industrial innovators have cornered key manufacturing markets. Praveen Kumar, manager of Baillie Gifford Shin Nippon, tells Joji Sakurai how they did it...
27 Sep 2023 Ohayō Japan!
Our analysts discuss what they think may be a new dawn for the Land of the Rising Sun...
21 Jul 2023 Shin Nippon: Japan’s hidden global champions
Discover the hidden gems in Japan’s small cap market. Praveen Kumar, manager of Baillie Gifford Shin Nippon, says there’s more to Japan than manufacturing...
09 Jun 2023 What is the long-term outlook for Japanese smaller companies?
In this update, Baillie Gifford Shin Nippon manager Praveen Kumar, shares the team’s views and provides an update on the performance over the past year...
21 Apr 2023 Fund Analysis
BGS is trading on a rarely available wide discount…
03 Mar 2023 Japan: the small businesses with big opportunities
Baillie Gifford Shin Nippon manager Praveen Kumar discovers the lesser-known businesses creating premium products in Japan...
20 Jul 2022 Ingredients for success
We identify several less conventional trusts that offer strong sources of diversification to major indices…
20 May 2022 Baillie Gifford Shin Nippon Investment Trust: Manager Update
Praveen Kumar, investment manager of Baillie Gifford Shin Nippon PLC gives an update on the performance of Shin Nippon over the past year and shares the team’s views on the long-term outlook for Japanese smaller companies...
05 Apr 2022 Fund Analysis
BGS has the best long-term track record in the Japanese sectors…
10 Nov 2021 Fantastic growth funds (and where to find them)
We found them in India, Japan, frontier markets, healthcare and the global sector – and here they are…
10 Nov 2021 Slides and Audio: Baillie Gifford Shin Nippon
Download the presentation and listen to the audio from our 'Fantastic growth funds (and where to find them)' conference on 4 November...
14 May 2021 Baillie Gifford Shin Nippon – Manager Insights
Praveen Kumar, investment manager of Baillie Gifford Shin Nippon PLC gives an update on the performance of Shin Nippon over the past year and shares the team’s views on the long-term outlook for Japanese smaller companies. Capital at risk.
12 May 2021 Fund Analysis
BGS offers a portfolio of Japan’s fastest-growing and most disruptive companies and has generated sector-leading performance…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
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…
02 Dec 2020 Japan's Great Wave of Change
In Japan, crisis often sparks accelerated change and innovation. Praveen Kumar, manager of Baillie Gifford Shin Nippon, talks about the upstarts making inroads...
12 Dec 2019 Japan's cutting edge
The qualities that give the best companies their advantage are not always obvious. Praveen Kumar, manager of the Baillie Gifford Shin Nippon investment trust and deputy manager of the Baillie Gifford Japan Trust, outlines the ingredients of lasting success...
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...
07 May 2019 Fund Analysis
This ultra-active Japanese smaller companies fund, already the cheapest in its sector, reduced its fee last year...
12 Sep 2018 Fake news...
Small cap funds, despite their reputation to the contrary, are less volatile and have delivered better risk adjusted returns than their large cap peers...
19 Jan 2018 Full steam ahead?
Jupiter Fund of Investment Trusts manager Richard Curling gives his view on the potential risks and rewards for the major equity regions around the world in 2018...
27 Sep 2017 Not the usual suspects...
We highlight a selection of equity trusts that have managed to produce returns that are lowly correlated to global markets...
27 Sep 2017 Fund Analysis
A growth focused Japanese smaller companies trust with an outstanding track record relative to its benchmark and peers...
18 Sep 2017 Business as usual
We meet the new managers of Baillie Gifford's Scottish American Investment Company and find that they have much in common with former boss Dominic Neary...
22 Aug 2017 Japan briefing
We examine the opportunities and threats facing investors seeking exposure to Japan...
20 Jun 2017 Baillie Gifford Japan Trust
A consistent performer in positive and negative market cycles, led by a management team with long experience in Japanese equities...
26 Apr 2017 The greatest...
We use technical analysis to identify some of the best stock picking fund managers over the long-term...
19 Dec 2016 Small is beautiful…
We identify the UK's most efficient trusts, all of which have operational costs below 0.1%...
03 Jun 2016 Japan: Negative interest rates are just the beginning
Helicopter money could be among the measures policymakers use to revive Japan's struggling economy...
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