Problems in the broader Japanese economy, particularly issues around debt and deflation, have little relevance to small-cap companies, Shin Nippon Investment trust manager Praveen Kumar has argued.
Returning 205 per cent over five years, the £178m trust has more than doubled the returns from the Japanese small-cap sector and was one of the top performing close-ended investment vehicles in 2015, according to FE Trustnet.
Launched in July 1985, the recent strong performance of the trust has been generated against a backdrop of economic difficulty in Japan, as the country’s debt burden grows larger, and measures which aimed to reverse the deflationary trend have proven fruitless.
During a Baillie Gifford roundtable event in Edinburgh, Mr Kumar – who took over from John MacDougall in December – characterised Japanese small-cap companies as “living and dying by their own decisions”.
He said: “You could draw tenuous links between smaller companies and the level of debt, but ultimately the ground reality is it doesn’t matter for these firms what the broader fiscal situation is.”
Mr Kumar described wider economic issues as a “distraction” for Japanese small caps, adding it was far more important for firms to get the business models right and execute their “plan of attack” well.
He also said it was “pointless” obsessing over the current state of investor sentiment.
“Rather than getting caught up in those short-term noises and volatility, I would rather focus on picking companies that will make me multiples of my money over a five to 10-year period.”
katherine.denham@ft.com
