Fund Profile

Disclaimer

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.

Overview
JFJ trades at an attractively wide discount, and this could be a chance to ‘buy the dip’…
Overview

JPMorgan Japanese (JFJ) invests across the entire market-cap space, focussing on Japanese companies which are best able to capitalise on the secular growth trends underpinning the domestic economy. JFJ is run by lead portfolio manager Nicholas Weindling and co-portfolio manager Miyako Urabe, who are in turn supported by a substantial roster of analysts, all of whom are based on the ground in Tokyo.

JFJ has been able to generate an attractive long-term return profile, not only handily beating both its benchmark, the TOPIX Index, and its peers over the last five years, but also offering investors historical diversification despite having an attractive upside/downside capture ratio. However, given the headwinds which growth stocks have faced, the last 12 months have been slightly more difficult (as we describe in the Performance section). Yet JFJ has been able to keep up with the TOPIX during this period, having rebounded strongly in the last few months thanks to the strong earnings of its holdings.

2020 and 2021 saw a period of low turnover for the strategy, and the managers are feeling increasingly confident in the long-term trends underpinning the growth of their companies. There have been a handful of purchases of new small-cap companies, as we outline in the Portfolio section.

JFJ has also received the highest possible rating for sustainability from Morningstar. JFJ is not a dedicated ESG strategy, but the team place great weight on ESG risks in their analysis, with their investment process naturally avoiding the worst ESG offenders, given their low quality.

Analyst's View

We think JFJ is an attractive strategy for a growth-focussed investor. This is not just because of its impressive track record, but because of how its managers are focussed on capitalising on the secular trends driving Japan. These trends often have long runways of growth, given the amount of time it takes for them to be realised. Two examples of multi-year trends are corporate governance reforms and Japan’s ageing population, with major progress still being made to resolve these issues.

We do not believe that 2021 to date has fully reflected the long-term potential of JFJ, given the decline in its relative performance over the last 12 months. Like JFJ’s managers, we believe that this is a reflection of the strong rebound in value stocks from their pandemic lows, rather than a deterioration in the long-term potential of Japanese growth stocks. This makes JFJ’s current discount a potential entry point, given its recent widening as a result of the headwinds which growth investing has faced, offering investors the opportunity to ‘buy the dip’.

We note that JFJ has a more aggressive risk–return profile than its benchmark, albeit one which is justified by its higher metrics, such as a superior Sharpe ratio and higher alpha. However, cautious investors may wish to ensure they are able to tolerate the trust’s more volatile return profile. JFJ does also provide investors with one of the most sustainable Japanese equity strategies available, which may make JFJ attractive to ESG-conscious investors.

BULL
BEAR
Strong secular tailwinds underpinning the strategy
Can underperform during a value-led stock market, as we saw earlier in the year
Sector-leading ESG credentials
Gearing can enhance losses on the downside
Discount may offer attractive entry point
Has high volatility relative to peers and benchmark
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
View all

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