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    CONTINUE Go Back
    1. Taking the long view on Japanese growth

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    Taking the long view on Japanese growth

    The JPMorgan Japanese Investment Trust offers investors capital growth opportunities from a market often overlooked by UK investors.

    J.P. Morgan Investment Trust Team

    Investors searching for opportunities in today’s uncertain world may well overlook Japan. Economic headlines about the country could be discouraging: 2019’s consumption tax hike and GDP fall, followed by coronavirus and its effects (such as postponement of the Tokyo Olympics), and recession. But look behind the headlines, beyond the Dow, and Japan is home to a number of best-in-sector companies with exciting futures. The JPMorgan Japanese Investment Trust offers the opportunity to tap into their growth.

    Backing winners

    Of course, Japan is not immune to global uncertainty. It is by nature more cyclical than other developed markets and can therefore be commensurately more impacted, both positively and negatively by the slings and arrows of economic fortune. However, rather than trying to predict the direction of the Japanese market and the global economy, The JPMorgan Japanese Investment Trust focuses on generating long-term capital growth from attractively valued investment themes and individual stocks. Tokyo-based portfolio manager Nicholas Weindling, explains: ‘The companies we have invested in have strong structural growth outlooks, competitive positions and balance sheets. We believe they will perform well in the long-term regardless of the performance of the wider global economy. Backing long-term winners means that the earnings of our companies are less volatile.

    Unknown strengths

    The trust’s focus on the long-term (and that it is unconstrained by sector and market cap) means it can avoid structurally weak sectors such as steel, banking and automotive. Low-growth, old economy stocks – household names such as Canon, Toyota and NEC – dominate these sectors, and Japanese ETFs. Instead, explains Weindling, companies on the trust’s portfolio ‘are becoming household names or are well-known but people don’t know they are Japanese’. These highly-investible companies could be hidden in plain sight. For example, most job-seekers who have used Indeed, the world’s number one online recruitment website, will be unaware that its parent company, Recruit, is a Japanese-owned business.

    On balance

    Investing in the growth of Japanese companies like Recruit has been made easier by Japan’s corporate governance ‘revolution’ (or at least, modernisation). While a few years ago it would have been hard to talk about dividend yield in relation to Japanese companies, changes to regulations around corporate governance have enabled companies to offer buybacks and dividends. In contrast to dividend suspensions in Western markets, they have generally continued to do so. This, explains Weidling, is thanks to the strength of Japan’s corporate balance sheets: in Japan, well over 50% of non-financial companies have net cash positions, versus 15% for the S&P 500 and over 22% for the MSCI Europe. This corporate strength makes the trust even more solid, and while income is not the trust’s priority - its focus first and foremost is on growth - it does continues to pay a dividend.

    Compelling performance

    Of course, although past performance is not a reliable indicator of current and future results and dividend payouts can’t be guaranteed, the trust’s performance is nevertheless eye-catching: it has delivered a 10-year annualised NAV and share price returns of 13.6% and 14.7% respectively, and it sells on a 10.2% discount to net asset value (NAV). This performance has earned the Trust a five-star Morningstar rating. However, Weindling admits: ‘When the economy picks up very rapidly it can be a bit more of a struggle for our relative performance but in the long-term we have been investing in very good stock. I’m not saying we will always will, but I hope we will continue to out-perform.

    Quality assurance

    Past performance and economic outlook aside, investors should, like Weindling and his team, focus on the growth potential offered by the trust’s portfolio of best-in-class performers and future star names in a market that is often overlooked by UK investors. Weindling assures investors that, in uncertain times, they should take comfort in the quality of the companies that his team invests in. The qualities of the JPMorgan Japanese Investment Trust should make it an attractive option for the investor looking for long-term growth.

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    This is a marketing communication. The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. The value of investments and the income from them may fluctuate in accordance with market conditions and investors may not get back the full amount invested. Past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, R.C.S. Luxembourg B27900, corporate capital EUR 10.000.000. This communication is issued in the UK by JPMorgan Asset Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England No. 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5J

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