Baillie Gifford Shin Nippon (BGS) had an outstanding year to 31 January 2021, with the NAV increasing by 34.0% on a total return basis, compared to a 5.3% rise in the comparative MSCI Japan Small Cap Index.
Top performers and main detractors
Highlights from the portfolio over the year included:
- “Online legal portal Bengo4.com was the top positive contributor to performance, with its shares more than doubling over the past year
- Japan’s top online food delivery company Demae-Can and leading online drug marketing platform M3 were also among the top performers
- While most online businesses benefitted from the pandemic, sectors like physical retail, travel and manufacturing were unsurprisingly hard hit as they experienced severe disruption due to a series of national and regional lockdowns
- Detractors from performance included cosmetics retailer, Istyle, travel operator, H.I.S, and barcode maker, Sato Holdings
- Among the new holdings purchased over the past year was GA Technologies, a disruptive and rapidly growing company that is making extensive use of technology to disrupt Japan’s real estate market”
‘Pandemic has accelerated much-needed structural change’
The following is extracted from the outlook section of the manager’s report section: “Whilst the pandemic has caused large-scale disruption across societies and businesses, more positively, it has also accelerated some much-needed structural change. We believe this is likely to be beneficial for consumers and businesses in the long run. Japan has had a history of not keeping up with the times, especially when it comes to using technology. The pandemic has laid bare the inadequacies of corporate Japan and in the process, provided a strong tailwind for smaller companies that are at the forefront of these structural changes. What we have witnessed over the past year is simply an accelerated expansion of the growth opportunities for numerous fast-growing smaller businesses in Japan. This is a hugely exciting development for Shin Nippon, and we look forward with optimism to seeking out and investing in these exciting smaller companies.”
BGS: Baillie Gifford Shin Nippon has an outstanding year