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 (LON:JFJ) takes a highly-active approach to investing in Japan, with the managers, Nicholas Weindling and Miyako Urabe, looking for companies which can deliver exceptional returns over the long run. The search for high-quality, sustainable earnings has led the managers to build a portfolio tilted towards technology, the internet and consumer areas. These sectors fell out of favour in 2022, but Nicholas and Miyako believe that, for the most part, the long-term outlook for their portfolio companies is the same or better.

The managers’ active, concentrated approach is a source of volatility, as is generally significant structural gearing and holdings in the small and mid-cap sectors. These features also increase return potential and JFJ has a strong track record of doing very well when Japanese markets rally (see Performance). Nicholas and Miyako note that Japan is, currently, looking very cheap in comparison to its international peers and its own history, which adds to the attraction of a long-term investment at this time.

The focus on quality growth means that JFJ’s portfolio typically trades at a premium to the market, with investors paying more for higher-growth prospects. This premium has significantly eroded over 2022, as we discuss under Portfolio, which we think could represent an opportunity.

The focus on quality brings with it a keen eye for sustainability and ESG, these considerations being reflected in the quality ascribed to a company and the valuation required for investment. JFJ has the highest rating from Morningstar for sustainability in its Japan peer group.

JFJ’s shares trade at a discount to NAV of 6.8%, at the time of writing, which compares to a five-year average of 7.4% and a sector average of 7.9%.

Analyst's View

We think Japan could do well in 2023. The country has only recently dropped the last coronavirus restrictions, which means we expect a boost to consumer spending and economic activity. The yen is cheap, which benefits the economy as a net exporter, and China’s reopening could see an increase in demand from one of Japan’s key customers. Inflation is more modest than it is in Europe, which should increase the ability of Japanese companies to pass on higher prices. Additionally, we note that if global growth does surprise on the upside, Japan could do doubly well, given the sensitivity of its markets to the global economy.

Nicholas and Miyako are more focussed on the long term, but they do note the low valuations of Japanese equities, as well as the erosion of the historic premium at which their portfolio trades above the market. We think structural growth is on sale in Japan and this looks like a potentially attractive long-term entry point. JFJ is not for the faint-hearted though. The focus is unabashedly on the long-term, and the portfolio is highly active. As a result, in the short term, the performance trend of the portfolio can be volatile. However, for investors with a long-term time horizon, we think JFJ is an attractive way to benefit from the exciting growth potential in Japanese companies.

Bull

  • Highly active approach increases the chance of outperformance
  • Deep resources devoted to stock-picking in an under-researched market
  • Japanese equities look attractively valued, as does the currency

Bear

  • Gearing can enhance losses on the downside
  • Strong style bias and active approach may lead to periods of underperformance
  • 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 Jun 2023 An automated future
Labour shortages seem more pressing than building LLMs…
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 ask what 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...
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...
05 Sep 2018 Bullseye
The third arrow of Shinzo Abe's grand plan, corporate reform, could have significant implications for undervalued Japanese equities...
14 Dec 2017 Race to the bottom
How are investment trust boards doing, in bringing down their 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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