Japan as a home for a slice of your investments has rarely looked more enticing. So says the manager of the UK’s biggest stock market-listed Japanese investment trust.
According to Nicholas Weindling, who runs the £1.2billion JPMorgan Japanese fund, the country has seldom been so investible since he began running portfolios from Tokyo 22 years ago.
He says: ‘There has been a massive change in terms of corporate governance, with Japanese companies now embracing shareholders and rewarding them with dividends. Also, we’re seeing wages increasing, inflation ticking up and the economy moving into growth mode. With company valuations attractive compared to those in other countries – especially the US – Japan is the investment place to be.’
Domestic interest in the stock market is also increasing, he adds, driving equity prices higher.
In the past year, the trust has generated returns of 35 per cent. It is invested in 60 stocks, many of them global brands: sports giant Asics, video game firm Nintendo and clothes retailer Uniqlo.
‘Asics is winning market share from the likes of Adidas and Nike,’ Weindling says. ‘Nintendo owns super brands in Super Mario and Pokemon, while Uniqlo is expanding its global footprint, opening stores in Birmingham and Glasgow – it’s Japan’s answer to Zara.’
JP Morgan’s Japanese fund has invested in videogame firm Nintendo, home to the famous Super Mario series
Uniqlo is opening more stores around the world… it is seen as Japan’s answer to Zara
Footwear brand Asics has been winning market share from global leaders Adidas and Nike
Other dominant investment themes in the fund include defence. Among its top-ten holdings is IHI Corporation, which it bought into nearly two years ago.
Although IHI makes everything from lawn mowers to cranes, it is increasingly focusing its business on manufacturing aircraft engines for Japan’s Ministry of Defence and supplying rocket systems for guided missiles.
Weindling says: ‘Defence is a big investment area for us.’
Another key holding is Mitsui Engineering & Shipbuilding. Banks – a beneficiary of higher interest rates – also feature in the trust, with Mitsubishi UFJ Financial and internet bank Rakuten among its biggest stakes.
The trust draws upon a big team of JPMorgan investment professionals based in Tokyo.
‘There are 4,000 listed companies in Japan,’ says Weindling. ‘Half of those get little coverage from analysts.
‘Our boots on the ground mean we can meet companies face to face and get a real feel of what is going on inside the country.
‘It gives us a good perspective, an edge.
‘Equally, our offices across the world provide us with information that helps us assess those companies competing against the Japanese businesses we own. For example, Adidas and Nike and how they are faring compared to Asics.’
While the recent performance looks good, the trust struggled in the aftermath of Covid, underperforming in 2021 and 2022 as its emphasis on growth stocks backfired in response to a strong pick-up in inflation.
In 2022, the trust recorded losses of nearly 28 per cent, while the Tokyo Stock Price Index lost just 4.5 per cent.
‘We made some mistakes,’ Weindling admits, ‘but we’ve done a lot of work to correct them by repositioning the portfolio.’
With prime minister Sanae Takaichi pursuing a growth agenda – and looking to cement her position by calling a snap election she is confident of winning – he says the future for investors is ‘exciting’.
The trust has low annual charges of 0.46 per cent – keener than the three rival listed Japanese funds managed by Baillie Gifford, Chikara (CC Japan & Income Growth) and Schroders.
Its stock market ticker is JFJ and identification code 0174002.
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