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 Investment Trust (JFJ) seeks to maximise total returns through a portfolio of quality, high-growth Japanese companies. Led by Nicholas Weindling, working with the support of an experienced team of local analysts, the team invest across the entire market-cap space. This includes a small- to mid-cap allocation, using a bottom-up process to identify companies which they consider the best ‘premium’ or ‘quality’ opportunities.

As we note under portfolio, much of Nicholas and his team’s stock selection is driven by their understanding of the thematic issues driving the Japanese economy, many of which have accelerated during the COVID-19 pandemic. Their holdings are well positioned to benefit from changes in demographics, automation, corporate governance and the growth in online and internet services; these are discussed in depth in the Portfolio section.

The trust’s long-term performance continues to remain strong versus the benchmark, with JFJ further outperforming during the current pandemic. As we discuss in the Performance section, this was in part due to the team’s identification of structural growth opportunities, with many of the holdings beneficiaries of the COVID-19 economy. JFJ is also ranked amongst the best strategies in its sector for ESG, as we discuss under the ESG section.

JFJ is c. 16% net geared, reflecting the managers’ current positive sentiment. The fund trades at a c. 7.2% discount, which is in line with the peer group average, despite its recent outperformance and having the lowest OCF in the AIC sector. As we discuss under the Discount section, the board has undertaken selective buybacks in the most recent financial year to seek to address this.

Analyst's View

We believe the JFJ team have demonstrated a clear and deep understanding of the broader Japanese economy and the trends underpinning equity markets. Investing in a wide range of companies gives them the opportunity to generate alpha through stock selection, and is reflected by their high active share.

Since the emergence of COVID-19, and thanks to the outperformance of quality and growth factors during this period, they have been further vindicated in their identification of the sectoral themes that have contributed to their stock selection. The concern now is that a potential resolution to the COVID-19 crisis may result in a shift towards value and cyclical stocks and lead to underperformance. However, the JFJ team are confident in the continuation of the secular growth story, believing that COVID-19 has rapidly advanced many existing trends and improved the outlook of the companies they hold.

JFJ is relatively highly geared, reflecting the depth of opportunities the managers are observing. That said, if there is a shift towards value, this gearing will exacerbate any portfolio underperformance. We maintain the view that given JFJ’s long-term superior performance, low cost and exceptional ESG credentials, the current discount relative to peers could be unwarranted. In some ways an investor's conviction could be enhanced given its performance during the current pandemic.

bull bear
Strong performance post the COVID-19 crash Possible cyclical recovery after COVID-19 could lead to underperformance
Large and experienced team, all on the ground in Japan A failure of one sectoral factor to materialise will impact multiple holdings
Lowest OCF in sector Gearing can accelerate losses in falling markets
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

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
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