Investment trust insider on Japan – Happy 40th birthday Baillie Gifford Japan!
Baillie Gifford Japan (BGFD) is about to celebrate its 40th birthday, having been launched on 1 December 1981. It was something of a trailblazer in the sector. JPMorgan Japanese (JFJ) was incorporated earlier than BGFD, but it didn’t adopt a Japanese strategy until later in December 1985. The smaller company trusts Baillie Gifford Shin Nippon (BGS) and JPMorgan Japan Small Cap Growth and Income (JSGI) also came to the market in the mid ‘80s.
For a large part of BGFD’s life (1991 to 2018) it was managed by Sarah Whitley. She handed over responsibility for the trust to Matthew Brett in April 2018. He is assisted by Praveen Kumar who manages BGS.
BGFD’s long term returns are very good. The chairman quotes an annual total return of 10.6% on net assets from launch until 31 August 2021, against 4.7% per annum for the fund’s Topix stock market benchmark. Over almost 40 years, that means BGFD turned £1 into £53.85 whereas Topix turned £1 into £5.21.
The benchmark’s lacklustre returns reflect the prolonged slump that Japan suffered following the bursting of an economic bubble in the 1990s. Under Whitley, BGFD navigated its way through this by focusing on companies that could grow regardless of the economic backdrop.
However, over the medium term of five years, BGFD lags JPMorgan Japanese and Fidelity Japan (FJV) and, over a year, it ranks second to last in its sector. Some of this is down to stock selection – having Softbank as its largest holding was unhelpful, for example. However, BGFD’s performance has also been impacted by the profit-taking in growth sectors and rotation into value style stocks. This trend is evidenced by the strong returns generated by CC Japan Income & Growth (CCJI) over the past 12 months.
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