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You can find growth stocks in the 'New Japan'

John MacDougall, manager of the Baillie Gifford Shin Nippon (New Japan) investment trust, talks about two stocks he says contradict investors' negative views of the country.

You can find growth stocks in the 'New Japan'

Baillie Gifford Shin Nippon is the best performing investment trust in the Japanese Smaller Companies sector. Over five years shares in the £70 million fund have generated a total return of over 47%, rising to 154% over 10 years.

Fund manager John MacDougall says investors's negative views of Japan are understandable after years of stock market declines and an economy stuck in deflation. However, he says the smaller, younger companies he invests in, such as MonotaRO and Harmonic Drive Systems, represent a more dynamic and entrepreneurial side that is rarely recognised in the West.

MacDougall's commments in this video come at an interesting time for UK funds investing in Japan. The country's new Liberal Democratic government is pushing for a much looser monetary policy in order to drive down the value of its currency, the yen, and boost exporters. The country's stock market, as measured by the Topix index, responded with a 5% rise in December. Many funds have bounced back much faster. Shares in Shin Nippon have shed the small discount at which they usually trade in response and moved to a 4% premium to net asset value.

2 comments so far. Why not have your say?

peter montgomery

Jan 16, 2013 at 16:42

And how many competitors in his peer group of smaller Jap. companies? 2or3 max.

I held this fund for around 7 years and found great difficulty in discerning any continuing theme or reasoning behind the vast turnover within the Trust. In fact I did an exercise for 3 years and not one stock was held for that duration .Yes,the commentary and overview was gushing about the opportunities for technology and change in the corporate sector but a stock highlighted as the greatest thing since sliced bread in one Annual,was gone the next,often at considerable loss.Gearing was another factor which led to sub-optimal returns and a widening discount,perhaps not as great as it warranted as clients of the said Manager were big holders.Mind you,before the Yens recent decline and corresponding rise in the mainstream equity market,most Jap companies were 'small' in market cap terms.

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Anzelm Cydzik

Jan 21, 2013 at 15:21

For the record:

There are 5 Japan Smaller sector classified investment trusts.

Shin Nippon's turnover for the year to 31 January:

2012 was 19.7%

2011 was 16.5%

2010 was 21.0%

2009 was 21.0%

2008 was 21.1%

As at 31 July 2012 (the interim results), annualised, it was 9.2%.

When compared to Open Ended Japan Funds (not just smaller)

Shin Nippon's NAV performance ranks it:

1 out of 69 over 1 year

1 out of 67 over 3 years

5 out of 57 over 5 years

All to end December 2012 (source:FE)

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