Edinburgh-based investment management firm Baillie Gifford has launched a new fund to sit alongside its range of Japan-focused funds.
The new proposition, called the Baillie Gifford Japanese Income Growth Fund, trawls the market for good-quality businesses with strong prospects for earnings growth, adopting a long-term view to investments. The fund’s current portfolio yields 2.5 per cent.
It will be managed by Matthew Brett, who joined the firm in 2003 and is a co-manager of the Japanese All Cap strategy which has returned 73.47 per cent (as at 2 June 2016) over a five-year period, according to FE Analytics data.
Baillie Gifford said there was no minimum investment for the product, which comes with an annual management fee of 0.65 per cent.
Investors who buy before the end of September will have access to a Y share class, with a management fee of 25 basis points for the first 12 months, the company added.
The fund house unveiled the new Japanese strategy just over a week after the launch of the Baillie Gifford Multi-Asset Growth fund, which targets a return of 3.5 per cent per annum ahead of UK base rate, net of fees.
The company’s spokesman said Japan has become a more attractive investment proposition thanks to a “widespread” secular change in corporate attitudes to shareholder returns in the market.
News of the new fund came a day after the Investment Association published the net retail fund sales April. It was a dark month for Japanese equity funds which had net outflows of £428 million.
In all, net retail fund sales to UK investors were £1.2bn.
Provider view
Mr Brett, said: “We believe that our focus on companies with good growth prospects and strong balance sheets gives the best opportunity for dividend growth over the medium term.
“We are seeing improving attitudes to corporate governance in Japan. Shareholder payouts are increasing, and there is scope for this trend to continue for many years. Our new fund aims to generate strong long-term total returns as well as provide investors with a higher yield than the Japanese market.”
Adviser view
Mark Evans, chartered independent financial adviser at Shropshire-based Beaumont Financial Planners, said: “I think Japan is a difficult market. It has not been the greatest market to invest in since 1987, really. The market frequently moves up and down, and in up periods, the market does not tend to go very high.
“I think the economic issues in Japan will eventually resolve themselves. The government just needs to figure out a way of getting the Japanese population to spend more.
“A lot of fund houses are increasingly looking at different investment strategies because they are struggling to make money from emerging markets at the moment. You also find that fund houses tend to copy each other.
He added: “I occasionally get clients who want to be invested in a particular fund, but it is rarely a new fund. The investment philosophy of a new fund may seem well and good, but investors can only truly gauge its effectiveness after a few years.”
Charges
Management fee of 0.25 per cent for the first 12 months for investors who buy before the end of September. The annual management fee is 0.65 per cent thereafter.
Verdict
Investment strategies are faltering at present. Emerging markets have endured significant headwinds in recent times – to the detriment to yield.
Meanwhile, the well of opportunities in the more traditional, less risky investment markets is beginning to run dry. It is therefore unsurprising that fund houses have looked at other investment strategies with a keen eye to circumvent against the loss of income from its stuttering flagship offerings.
