Praveen Kumar is an experienced Japanese fund manager and has run the trust since December 2015
Long-term performance has been strong, but this isn’t an indication of how it will perform in the future
The trust invests in high quality, disruptive companies that have the potential to drive change and strive for a ‘New Japan’
How it fits in a portfolio
Baillie Gifford Shin Nippon Trust aims to grow investors’ money over the long term by investing in high-quality, smaller Japanese companies. These tend to be younger, more disruptive companies that offer excellent long-term growth potential, but are higher risk than their larger peers.
The trust could work well as part of an adventurous investment portfolio seeking exposure to Japan, or diversify a portfolio with Japanese funds focused on larger firms. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to net asset value (NAV). Manager
Praveen Kumar has run this trust since December 2015 and has spent his entire investment career at Baillie Gifford, joining in 2008. He’s an investment manager on the Japanese equites team and has specialised in Japanese equities since 2011.
Kumar is also the lead manager of the open-ended Baillie Gifford Japanese Smaller Companies Fund and is deputy manager of the Baillie Gifford Japan Trust. These are run in a similar way and invest in some of the same companies. We think he can comfortably manage his commitment to these responsibilities. Kumar is also the lead manager of the open-ended Baillie Gifford Japanese Smaller Companies Fund and is deputy manager of the Baillie Gifford Japan Trust. These are run in a similar way and invest in some of the same companies. We think he can comfortably manage his commitment to these responsibilities.
He’s supported by the broader Japanese equities team. It’s currently made up of eleven members, including a mix of portfolio managers, analysts and product specialists which provide ideas, challenge and analysis. There is also some overlap with other investment teams, including the global teams. The overlap helps with understanding broader market trends and offers another source of potential investment ideas. Process
Kumar likes to keep things simple. He focuses on investing in fast growing companies run by young and dynamic management teams. These types of companies tend to be driving meaningful and much needed change in Japan. Things like advancements in healthcare, financial innovation and the development of new technology are a just a few examples of companies striving for a ‘New Japan’. Kumar believes companies that can spur change or benefit from these trends are key to growth over the long term.
Another crucial part of the manager’s investment process is investing for the long term. Almost a quarter of the trust’s investments have been held for over ten years and over a third have been held for between five and ten years. The means the trust typically holds stocks for longer than the market average, so turnover is kept low. There have been a few changes to the portfolio over the last 12 months though.
Following a sharp increase in independent power producers and suppliers, Enechange was added to the trust. It provides an online service to help people search for the best energy deal available and facilitate the switch if needed. Spibier, a synthetic biology company and Shima Seiki, a leader in automated knitting machines, were added to trust for their long-term growth potential.
Kumar also reduced some of the trust’s investments. Pandemic beneficiary Dame-can was reduced following a period of good performance. Demand has dropped off slightly so it’s not performing as well as it did during the pandemic, so the team wanted to take some profits and recycle elsewhere.
Outsourcing, an employment placement company, was also reduced over the last 12 months. The company is providing positive solutions to Japan’s labour issues but there were worries around a potential scandal. Kumar reduced the amount invested to limit the impact of any potential falls in share price and then engaged directly with the company to fully understand the situation. He continues to monitor the situation, but the issues turned out to be a much smaller issue than he first thought so he retains conviction in the company.
The trust has the flexibility to use gearing which can magnify any gains or losses. Investors should be aware that if used, it can increase risk. Culture
Baillie Gifford is an independent private partnership founded in 1908 and is owned by partners who work at the firm. This ownership structure means senior […]
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