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 (JFJ) aims to maximise capital growth through investment in a portfolio of high-quality Japanese companies. Managed by Nicholas Weindling, who enjoys extensive analytical support from a locally based team, the investment portfolio tends to tilt towards high-growth small- and mid-cap companies, in a market the team believe is fertile ground for active managers to generate outperformance. As we discuss in the Portfolio section, the team believe there are many high-quality companies with little broker coverage that are well placed to benefit from structural changes to the Japanese economy and society.

Whilst stock selection is driven by bottom-up observations, the team also identify thematic drivers which underpin long-term growth. Accordingly, they are exposed to companies positioned to benefit from Japanese demographic trends, corporate governance reform and the growth of online economic activity, as well as increasing automation in manufacturing.

With an extensive analytical team, JPMorgan are able to conduct over 4,000 company meetings a year in Japan, looking to understand operational models and developments. A focus on long-term winners, which are able to generate consistent growth both in Japan and overseas, lends itself to what is a low-turnover approach.

Long-term performance has been strong relative to the benchmark, with stock section a positive contributor. The focus on identifying companies with the greatest operational growth potential means JFJ has a significant growth tilt relative to most of the rest of its peer group.

JFJ is c. 12% net geared (as of 07/02/2020), reflecting a positive outlook from the manager. Despite the good long-term performance and lowest OCF in the AIC Japan sector, the discount remains wider than that of its peer group, at c. 10%.

Analyst's View

JFJ operates in a market with a plethora of companies and a dearth of broker research. With a deep pool of analytical resource based locally, this should give rise to excellent opportunities to identify and benefit from market inefficiencies and potential for stock selection to positively boost portfolio performance on a consistent basis.

The trust offers exposure to structural growth opportunities which have significant long-term potential. Gearing is usually employed, reflecting the managers’ view that the cost of borrowing is significantly outweighed by the returns potential from the companies they invest in. On the other hand, in the short term this can exacerbate the downside in periods of market drawdown. The Japanese market is often perceived to carry greater exposure to the global economic cycle than most peers, and a downturn in the global economy could prove negative for the relative performance of JFJ, given the relatively high sensitivity to market moves.

Strong outperformance relative to the benchmark has been seen in recent months. This is a continuation of a trend that JFJ tends to outperform strong positive markets where growth and quality factors outperform.

In our view, given the fact that JFJ has generated superior returns over the longer term and is the lowest-cost trust in the sector, the discount to peers is unwarranted.

bull bear
Positioned to benefit from structural growth trends Low level of broker research generally can exacerbate volatility in the wider market
Extensive analytical resources based in Japan, in a thinly researched market Japanese foreign exchange movements can have significant impact upon returns in the short term
Lowest OCF in the sector Gearing can exacerbate the existing tendency to underperform 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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