Boots on the ground
If you’re seeking out long term growth opportunities in Japan, it’s a major advantage to have ‘boots on the ground’. One of Japan’s leading foreign asset managers, The JPMorgan Japanese Investment Trust boasts a hugely experienced team of 25 managers and analysts based in Tokyo. The team’s local knowledge and exceptional access to company management helps them identify equities with undervalued earnings and growth potential. This is a competitive advantage particularly in the under-researched mid- and small-cap space, for when companies come to market, and when they are investable, the team has already have met them and have a view.
Actively finding future winners
The team is managed by two portfolio managers for Japan equities: Nicholas Weindling and Miyako Urabe. Weindling, who has 13 years’ experience of managing the trust, says the paucity of brokerage coverage of the Japanese market means that Japan brings exciting opportunities for active investors with real insight: ‘Over 70% of companies listed in Japan have three or fewer analysts covering them – and they cover the wrong sectors and wrong companies – not winners in the future!’ The team can leverage JP Morgan’s formidable global research resource which informs them of end-demand for Japanese products – and of opportunities in themes in which Japan lags behind the global curve.
Under the radar
Without access to such resources, Japan often falls under the radar of UK investors. Longtime household names such as NEC, Canon and Honda and tend to be front-of-mind, but they don’t offer the growth opportunities of the trust’s portfolio. The trust does own very large companies such as Keyence, global leader in manufacturing technology, and Hoya, which boasts a 100% market share in the glass substrate used in hard disk drives for data centres. But for Weindling, uncovering the gems of the Japanese market and adding real value for investors are the most rewarding aspects of managing the fund. He explains: ‘As a portfolio manager, you want a market where you’ve got the tools to be able to out-perform and Japan is perfect for that.’
The investment trust structure of the Japanese fund offers investors further advantages. Its closed-ended structure lets the team look for growth potential across the entire market cap spectrum, right down to the smallest companies, without having to worry about daily flow. A further strength of the trust that should reassure investors is that, in addition to the experience and expertise of the trust team, it is governed by an independent board of directors. The board monitors the trust’s cost base, and the performance of fund managers, and safeguards the interests of shareholders. Weindling says the board is very proactive, which, ‘from an investor point of view, is exactly the type of board you want.’
Doing the right thing
In addition to the advantages of the investment trust structure, investors will take heart from the trust’s ESG philosophy. The team analyses every potential holding for its long-term sustainability and has an ESG checklist for each company in the portfolio. ‘ESG is completely integrated into what we do,’ says Weindling. ‘Our companies exhibit the very best ESG characteristics. For example, the carbon emissions of the portfolio are a tiny fraction against the Index. We just don't own stocks like tobacco, fuel or utility; we don’t invest in sectors like steel, utilities, cement - and nor do I think we're ever likely to.’
ESG credentials are just one of the attractions of the JPMorgan Japanese Investment Trust. With all the strengths of the investment trust structure, and the experience and expertise of a Tokyo-based team bringing internationally-diverse perspectives to its search for the next big Japanese success story, the trust offers a compelling opportunity for investors seeking long-term growth.