Six years of Abenomics: has reform paid off in Japan?
Six years ago, in December 2012, Shinzo Abe was formally elected prime minister of Japan and...
Baillie Gifford Japanese Income Growth
Launched in July 2016, Baillie Gifford Japanese Income Growth aims to benefit from the improving corporate governance in Japan, as more and more businesses move towards a progressive dividend-paying policy. The managers apply the same well-tested growth investing philosophy and process used by their other Elite Rated funds, combined with a focus on companies with the best dividend growth opportunities.
Our opinion
The Baillie Gifford Japanese equity team is one of the best around. This relatively new fund taps into the exciting change in dividend attitudes in Japan: a new corporate governance code, coupled with a large cash pile on Japanese balance sheets is a big opportunity for investors. While the headline yield figures may be low by Western standards, there is certainly plenty of room for growth.
Company description
Founded in 1908 and employee-owned, Baillie Gifford is based in Edinburgh but has offices in London and New York. Awarded the Elite Equities Provider Rating in 2016, 2017 and 2018, it specialises globally in equities, fixed income and multi-asset portfolios.
Fund manager
The fund is run by Matthew Brett and Karen See. Matthew also manages the Elite Rated Baillie Gifford Japanese fund. Matthew joined Baillie Gifford in 2003, after achieving a BA in Natural Sciences from the University of Cambridge, and a PhD in Psychology from Bristol University. Karen See has been part of the broader Japanese equities team since 2012. She has a degree in Economics from Birmingham University and is a Japanese speaker.
We tackle the income opportunity through the lens of a growth investor. Picking companies that can grow their earnings over time, as this is the most sustainable way to grow the income stream in the long term.
Karen SeeFund manager
Investment process
The process is designed to find growing companies that can sustain high returns on their invested capital. The key factor will be for companies to show a competitive advantage versus their competitors and stocks will fall into one of four growth buckets; secular growth, growth stalwarts, special situations and cyclical growth. Analysis will focus on financial strength and a management willingness to grow the dividend. Investments are made with a three to five year outlook, so a thematic overlay is put on the portfolio to monitor exposure to the long-term trends in the region.
Risk
Investing in Japan always carries high risk. This fund is reasonably concentrated at 45-65 holdings, and will have a natural mid-cap bias. As the team has a total return mindset, rather than a pure income-seeking mandate, it does differentiate this fund and the stocks it will buy. The portfolio therefore can have more high growth style companies compared with its peers, which could see the fund under perform when this style is out of favour.
See more
Related content
The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.