Baillie Gifford Japan (BGFD)

Baillie Gifford Japan (BGFD) exemplifies a high-conviction, fundamentals-led approach to investing in Japanese equities. The trust is managed by Matthew Brett, supported by Baillie Gifford’s ten-strong Japan team, and aims to deliver long-term capital growth through a focussed portfolio of companies with structural growth potential, strong competitive advantages and robust balance sheets.

The past 12 months have been a reminder of BGFD’s Performance potential in a supportive market backdrop. The trust has delivered a NAV total return of 19.1% to 30/11/2025 and a 23.6% share price return, ahead of the TOPIX’s 16.3%, driven largely by strong stock selection in areas such as AI, digitalisation and gaming. With investors growing wary of elevated US tech valuations, BGFD offers an alternative: discounted exposure to Japan’s growing strength in advanced manufacturing, semiconductor infrastructure and digital innovation.

This pace of returns has offered investors a glimpse of what the strategy can deliver when growth and quality are in favour, reminiscent of periods prior to 2021 when BGFD consistently outperformed in similarly supportive conditions. But it’s important to remember that performance has been affected by style headwinds over much of the last four years, where value-oriented sectors outperformed growth.

During market corrections over the year, Matthew has also taken the chance to add several quality companies to the Portfolio at much more attractive valuations. New positions over the year include Money Forward, added for its growing revenues and expanding margins, alongside Square Enix and Sega Sammy, two businesses the manager believes have meaningful monetisation potential, aligned with the structural growth in gaming and digital entertainment. To fund these new opportunities, several positions were sold over the year, including Topcon, which was acquired by private equity at a substantial premium.

BGFD’s shares trade on a Discount to NAV of 10.0% at the time of writing, wider than its five-year average of 6.8%.