These ideas then go through an analytical framework. Factors covered include industry background and the company's competitive advantage within it.
Considerations here include the industry growth rate, pricing structure, barriers to entry and the uniqueness of the product or service. Once these companies have been identified, the managers will look at their financial characteristics and the attitude of the management team.
The final consideration will be valuation. Broadly, the team believe it is better to find growth first rather than cheap companies. They will consider valuations relative to peers - looking at earnings, cashflow and returns.
The 45-65 stock portfolio has a mid-cap bias to accommodate the growth aspect of the strategy. Sectors where companies have no control over their pricing - such as oil & gas and mining – will be avoided.
The fund has returned 57.4 per cent to investors since its launch in July 2016, compared with 45.6 per cent for the IA Japan sector average. It currently yields 2.4 per cent and has ongoing charges of 0.63 per cent.
This relatively new fund is ideally positioned to tap into the exciting change in dividend attitudes in Japan. The Baillie Gifford Japan team are widely regarded as one of the best around and this fund not only offers income diversification, but also access to a growing dividend story.
Darius McDermott is managing director of FundCalibre