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%.