Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by Schroder Investment Management. 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

The Japanese equity market is deep and often under-researched, with a diverse set of companies of potential interest to investors, from world-leading large caps to high-growth small and mid caps. Schroder Japan Growth (LON:SJG) leverages Schroders’ extensive resources to identify attractively-valued, growing companies in the market, with the overarching strategy being to add alpha by superior stock selection.

The trust has been managed by Masaki Taketsume since July 2019. Masaki draws on the work of a team of 12 analysts and portfolio managers to help him select stocks, looking for companies which are trading below their fair value. The contrarian, value tilt to the approach is in contrast to the average trust in the sector, which is very focussed on high-growth stocks. SJG has benefitted from this tilt over the past year, as we discuss under Performance. An additional helpful trend has been improving corporate governance in Japan, which has been a source of alpha at a number of companies and Masaki expects it to continue to be.

Masaki has an optimistic view on the outlook for Japan in 2023. He notes inflation is modest versus that of developed world peers, as are union wage demands. The country has only recently reopened after the pandemic, which should lead to a boost in consumer spending and corporate earnings. Masaki has been tilting the portfolio towards domestic-focussed mid and small caps as a result, always looking for those with pricing power and strong corporate governance (see Portfolio).

SJG trades at an 11.3% Discount at the time of writing, compared to an 8.8% average for the AIC Japan sector.

Analyst's View

Japan looks like a potentially appealing place to invest in 2023. While the UK, US and Europe struggle to bring down inflation from double digits, in Japan it is in a far more manageable, and even welcome, range for policymakers who have been trying to generate positive inflation for many years. The currency remains cheap, with China’s reopening a potential boost to exports. If recession is avoided in the rest of the developed world, or just shallower than expected, this will also be positive for Japan which is highly geared to global trade. Additionally, there is the ongoing corporate governance reform movement, which Masaki tells us is gathering momentum and is a potential source of return not dependent on market direction. We note that, at the time of writing, we are increasingly seeing managers with a global mandate raising their weighting to the country.

Masaki’s bottom-up approach seems to us to be an attractive way to invest in the country at this juncture. Macro trends, largely in rates, have driven global equities in recent years, leading to extreme rotations in the relative performance of growth and value. We would not expect this to continue now that rates and inflation have settled at higher levels, with any declines likely to be slower and complicated by weaker economic environments. As such, a stock-picking approach with a strong quality focus seems appropriate to us and SJG’s wide discount versus its growth-dominated peer group, attractive.

Bull

  • Stock-picking approach less dependent on macro for alpha than more stylistically-biased strategies
  • Discount may offer attractive entry point
  • Deep resources at Schroders are an advantage with stock selection

Bear

  • May underperform during growth-stock rallies
  • Japan’s economy is tied to the health of the world economy, so the market could disappoint if the latter is weak
  • Gearing can extend losses on the downside
Continue to Portfolio

Fund History

17 Jul 2024 Balancing act
We ask why trusts with a more flexible approach have outperformed…
10 Jul 2024 Things can only get better
Discounts are yawning but markets are thawing and boards are on the offensive; Labour might not be the only thing making a comeback this year...
06 Jul 2024 America for growth, Japan for value
Different investment styles are needed for different regions…
03 Jul 2024 Monthly roundup: merger news and highlights from our June small cap event
Jo and Ryan discuss the latest news, reviews and interviews in the investment trust world...
02 Jul 2024 Trusts in Focus: Schroder Japan
We turn the spotlight on the new enhanced dividend and discount management policy for SJG...
08 May 2024 Winds of change
Why Schroder Japan is well-positioned to exploit valuation opportunities in an attractive and under-researched market…
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 Schroder Japan Trust plc: Can the Japanese stock market continue to scale new heights?
Why now is a particularly exciting environment for active, high conviction stock pickers in the region...
19 Apr 2024 Results analysis: Schroder Japan
SJG continues to outperform the TOPIX Index, buoyed by good stock selection and an in vogue ‘value’ style of investing…
01 Mar 2024 Making up for lost time
Why Japan has risen like a phoenix to deliver eye-catching returns for investors…
12 Jan 2024 Facing the future without fear
Do STEM graduates = money making companies?
08 Dec 2023 Fund Analysis
SJG continues its strong run of performance versus both the index and sector...
15 Nov 2023 Finding value in Japan
SJG is taking advantage of attractive valuations and corporate reforms…
15 Nov 2023 The Asian century
Failing to invest in Asia means omitting half the global economy from your portfolio…
19 Oct 2023 Not just a value play
There is more to Japan than gaming PB ratios…
02 Oct 2023 Results analysis: Schroder Japan Trust
SJG has delivered outperformance of the Japanese markets for three consecutive years…
27 Sep 2023 Ohayō Japan!
Our analysts discuss what they think may be a new dawn for the Land of the Rising Sun...
07 Jun 2023 Under pressure
We identify the equity trusts which have delivered the best downside protection in recent years...
02 Mar 2023 The Devil’s in the demographics
China’s population is in decline - should it turn east or west for inspiration..?
15 Feb 2023 Lost in translation
We argue Japanese equities look attractive on both a short and long-term view…
10 Feb 2023 Fund Analysis
Japan could be one of the most attractive countries for investment in 2023…
16 Dec 2022 Investment Trusts: opportunities in all market conditions
How are current market conditions impacting the Schroders investment trust range?
16 Dec 2022 Japan’s chance to shine – find out why this time is different
Schroder Japan Growth Fund - positioned to capture the opportunity in Japan...
16 Jun 2022 Fund Analysis
SJG is on a run of strong performance, while the discount remains attractive…
27 Apr 2022 Finding value in a haystack
Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities…
05 Aug 2021 Fund Analysis
As the most value-exposed trust in its sector, SJG has been a clear beneficiary of the reflationary rally…
14 Jul 2021 Grade inflation
We look at how our discounted opportunities portfolio has done in the first half of the year and update on the performance of our long-term rated funds…
08 Jul 2020 Fund Analysis
Operating a disciplined and consistent investment approach, SJG nonetheless trades on the widest discount in the sector...
04 Jun 2020 A different approach to Japan
Schroder Japan Growth offers a solid yield and a crisp focus on valuation which differentiates it from its peers...
18 Mar 2020 Their darkest hour?
We update our shortlist of discount opportunities...
28 Nov 2019 Is there a generational opportunity in Japan?
Two of our analysts go head-to-head, arguing the case for Japan...
11 Sep 2019 Fund Analysis
Despite clear continuity of management style, the retirement of Andrew Rose has seen this trust move to a wide discount versus peers...
01 May 2019 Sweet or sour?
Three months in, we check up on our list of discount opportunities...
30 Apr 2019 Fund Analysis
Schroder Japan Growth, despite its name, is the most value-exposed trust in the AIC Japan peer group...
View all

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