Best In Class  

Best in Class: Baillie Gifford Japanese fund

Baillie Gifford has a plethora of leading Japanese funds and trusts – all of which we rate very highly - and the team conducts around 500 company meetings each year in Japan and in Edinburgh.

A team member visits Japan every six to eight weeks.

They have a broad ‘follow list’ of around 350 companies, which are discussed at monthly meetings.

These are companies that typically demonstrate one of four primary requirements: positive industry background, durable competitive advantage, strong financial characteristics and management attitude aligned to the interests of shareholders.

At a second monthly meeting, the ‘focus list’ of 60 to 80 stocks is reviewed, which are either held in one of the main strategies, or are being actively promoted by an analyst for inclusion.

The final review stage is a twice-a-month model portfolio discussion at which the relevant investment managers promote changes to portfolios, based on analyst research or other strong views they may support.

The team is pragmatic about risk in the portfolio: the biggest risk being that they misunderstand the investment they have made, which is not a risk that is captured in traditional risk models. All portfolios are independently monitored by an in-house investment risk team using quantitative tools

The final portfolio typically consists of 45-65 stocks. The top 10 holdings currently account for just under 40 per cent of the portfolio, with SoftBank Group (8.5 per cent) the largest individual holding, followed electronic commerce and internet business Rakuten (4 per cent) and financial services company SBI Holdings (4 per cent).

This is a well-managed portfolio with a clear investment strategy and a long-standing manager.

The fund has been one of the most consistent in the sector and has proven itself in many different market environments. It should be a consideration for anyone looking for access to the Japanese market.

Darius McDermott is managing director of FundCalibre