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
Recent markets may offer an opportunity to ‘buy the dip’ in JFJ’s attractive growth opportunities…
Overview

JPMorgan Japanese’s (JFJ) managers, Nicholas Weindling and Miyako Urabe, have proven themselves uncompromising in the face of recent market volatility. The team remains committed to investing in Japanese growth companies, with a Portfolio of both large and small companies that can capitalise on the structural opportunities within Japan. The team aims to invest into the heart of ‘New Japan’, specifically in high-quality companies which offer the prospect of high growth.

Like many other growth strategies, JFJ has seen its Performance suffer year-to-date, underperforming both its peer group’s simple average and its benchmark. However, the trust has outperformed over the long term, and the team comment that the recent downturn is not a true reflection of the trends underlying JFJ’s holdings, which in their view will benefit from decade-long tailwinds. They note that Japan also demonstrates far lower inflation rates than its developed-market peers.

In our view, the team’s focus on high quality growth opportunities is becoming an increasingly important characteristic. High-quality companies are more likely to be able to maintain margins when faced with rising input prices. Perhaps as a result, JFJ has been able to outperform the TSE Mothers Index (typically representing lower quality growth opportunities) over the last 12 months.

JFJ demonstrates superior ESG credentials to its peers, having received Morningstar’s highest rating for sustainability. JFJ’s Discount (currently 6.9%) is narrower than the five-year average of 7.9%.

Analyst's View

We believe JFJ may offer investors a potential opportunity to ‘buy the dip’, capitalising on the recent sell off to buy into long-term Japanese growth opportunities on depressed valuations. While JFJ’s discount has not widened substantially, its NAV has taken a round-trip, approaching its pre-pandemic levels. Yet such a journey does not, in both our and the JFJ team’s opinion, reflect the true opportunity set. Given the huge impact COVID-19 has had on daily life, it is more than likely that the uptake of ‘New Japan’ services has only increased, meaning that JFJ’s NAV has, in our view, detached from its long-term growth potential at least in the near term.

While JFJ is a purely bottom-up strategy, Japan’s prevailing inflationary environment may be something of a relief to growth investors, as Japan’s inflation expectations are a fraction of that of their developed market peers. This means that JFJ may be viewed as offering relief from greater interest rate risk elsewhere, given the lower price pressure Japan may face, while still retaining the same growth-stock focus.

Regardless of the opportunity this presents, recent markets have demonstrated the team’s commitment to investing in the heart of New Japan. Even in the face of one of the most painful growth-stock drawdowns in recent memory, the JFJ team remain committed to capitalising on Japan’s structural growth opportunities. In our view, this is important for long-term growth investors who are looking for a committed management team prepared to look through short term pain. We also note that JFJ’s high sustainability rating may make it an attractive choice for ESG-conscious investors.

Bull

  • Recent drawdown offers a ‘buy the dip’ opportunity
  • Disciplined approach to the opportunities of ‘New Japan’
  • One of the highest sustainability ratings of any Japanese strategy

Bear

  • Gearing can enhance losses on the downside
  • May underperform during periods of high inflation
  • Risk/return profile of growth investing may not be suitable for cautious investors
Continue to Portfolio
2022 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

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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