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Shin Nippon seeks to increase unquoted exposure

Shin Nippon seeks to increase unquoted exposure

The board of the £507m Baillie Gifford Shin Nippon investment trust is seeking shareholder approval to allow the managers to invest up to 10 per cent of the fund’s capital into unquoted companies.

Baillie Gifford has several funds which invest in unquoted companies, with the company taking the view that many disruptive companies have less need to join a stock market, so the unquoted sector has become a greater investment opportunity.

The information is contained in the trust's annual results statement , covering the 12 months to the end of January 2019.

During the year in question, the trust lost 6.1 per cent, compared to a loss of 7.8 per cent for the sector.

Shin Nippon invests in Japanese smaller companies and the managers said uncertainty about the health of the Chinese economy had caused the Japanese market to underperform.

The board of the trust stated they expected little impact from Brexit.

The trust managers said that while there has been a cyclical downturn in Japan, its effects on business investment levels have so far been muted.

The managers wrote: "Weak Chinese demand over the past year had a negative impact on some Japanese small caps. In 2017, Japanese suppliers of factory automation equipment saw strong orders from Chinese customers.

"However, demand weakness last year led to fewer orders being placed as inventory levels rose.

"Conditions in the important Chinese and US automobile sectors also remained tough. After nearly three decades of growth, car sales in China fell last year.

"In the US, sales declined for most major Japanese car companies. As a result, smaller auto parts suppliers like Nippon Ceramic, a leading global manufacturer of ultrasonic sensors for cars, and IRISO Electronics, a manufacturer of connectors for car electronics, suffered operationally.

"Despite challenging conditions, both companies remain resilient. They have strong balance sheets and are investing in new product development to secure future growth."

david.thorpe@ft.com