Baillie Gifford Japanese Smaller Companies
Baillie Gifford employs its renowned growth investment process on the exciting, but high-risk area of Japanese smaller company investing with this fund. The managers have a 'buy and hold' approach, and are willing to ride out short-term share price movements in order to take long-term benefits from the best growth prospects. They can invest in a broad range of sectors and look specifically for innovative names that have the potential to be future industry leaders. They can and will participate in initial public offerings (IPOs).
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Brian Lum, Lead Manager Brian is head of the Smaller Companies Team and lead investment manager of the International Smaller Companies Strategy. He has been a member of the International Growth Portfolio Construction Group since 2015. Brian is deputy manager of the Shin Nippon Investment Trust and co-manager of Japanese Smaller Companies Strategy. Brian joined Baillie Gifford in 2006. He is a CFA Charterholder and graduated with an MSc and BA (Hons) in Physics from the University of Cambridge in 2006.
Jared Anderson, Co-Manager Jared is an investment manager in the Japanese Equities Team. Prior to joining the team, he worked in the Global Alpha, UK Equities and Fixed Income teams. Before he joined Baillie Gifford he spent two years as an Assistant Economist at the Scottish Government. Jared graduated MA (Hons) in Economics from the University of Edinburgh in 2012.
Brian Lum, Lead Manager Brian is head of the Smaller Companies Team and lead investment manager of the International Smaller Companies Strategy. He has been a member of the International Growth Portfolio Construction Group since 2015. Brian is deputy manager of the Shin Nippon Investment Trust and co-manager of Japanese Smaller Companies Strategy. Brian joined Baillie Gifford in 2006. He is a CFA Charterholder and graduated with an MSc and BA (Hons) in Physics from the University of Cambridge in 2006.
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Jared Anderson, Co-Manager Jared is an investment manager in the Japanese Equities Team. Prior to joining the team, he worked in the Global Alpha, UK Equities and Fixed Income teams. Before he joined Baillie Gifford he spent two years as an Assistant Economist at the Scottish Government. Jared graduated MA (Hons) in Economics from the University of Edinburgh in 2012.
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Investment process
The managers aim to identify smaller businesses that offer above-average growth prospects. They target companies with innovative business models and the potential to disrupt their industries; those that challenge traditional Japanese practices; as well as companies with strong overseas growth prospects. Sectors that are of particular interest include Japan’s emerging services industry, which is fast expanding due to government deregulation and corporate outsourcing, as well as technology and healthcare.
True to Ballie Gifford’s investment philosophy, the managers take a long-term view and do not rely on short-term valuations when they selects stocks. They invest with a time horizon of at least three to five years and are happy to hold stocks that may be classed as overvalued by other managers, as long as they meet the investment quality criteria.
Ideas are sourced from a wide variety of inputs, including from the team’s 500+ company meetings a year. These ideas are then debated with the wider investment team, using the experience and diversity of thought to develop a rounded view on the company. Within this, the team is asking four key questions about the company: What is the size of the opportunity? What problem is the company trying to solve? Is the management team aligned with the firm? And is management capable of delivering on the idea?
When ideas have been identified and validated, the managers will back them with conviction for the long term.
Risk
The fund is very stylistic and invests in smaller companies meaning it will be at the top of the risk spectrum. The portfolio is independently monitored by an in-house investment risk team using quantitative tools. This team meets formally with the managers on a quarterly basis to discuss risk.
ESG
ESG - Limited
With this fund, the managers take a long-term approach, looking for growth opportunities with firms that are likely to be future leaders. They believe that this long-term approach incorporates a natural bias towards sustainable business models. However, this is not a formal policy of the philosophy or process. Material ESG issues that are identified in the analysis will be considered as possible reasons to not invest, but this will be on a case-by-case basis, rather than a systematic approach. There is a strong focus on governance, with the team having regular engagement with the management of companies already held in the fund and those of prospective holdings. This is especially important when considering the smaller size of many of the companies held.
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