Baillie Gifford Japanese fund added to the Wealth Shortlist

The Baillie Gifford Japanese fund was added to the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential on 12 November 2024.

The fund invests in companies based in Japan. It focuses on larger companies but invests more in medium-sized companies than some other funds in the Japan sector. Investments in smaller businesses adds risk. The fund is managed in line with Baillie Gifford's growth-focused investment philosophy, with a focus on companies with high or sustainable growth potential.

Matthew Brett is lead manager of this fund. He has 21 years’ experience in the investment industry, all of which have been spent at Baillie Gifford. This means he’s well-embedded in the firm’s culture and style of investing.

Brett is a highly experienced investor, having joined Baillie Gifford and the Japan team in 2003. He has one of the longest track records in the UK asset management industry of investing in Japanese companies. He learned his craft from another experienced and successful Japanese equities investor (Sarah Whitley) over a prolonged period and continues to have the support of a 10-person team focused on Japan. We like the collaborative approach, with ideas coming from across the team and a focus on developing talent.

We’ve met Brett several times over the years, and believe he comes across as a thoughtful and reflective investor. These characteristics demonstrate a focus on client outcomes.

The fund’s philosophy is aligned with other Baillie Gifford funds. This means Brett focuses on the fundamentals of individual companies and their long-term potential for growth. He invests in what he believes to be some of the best companies in Japan with at least a five-year view.

The fund invests in companies at different stages of growth, and is segmented into four buckets:

• Secular Growth - companies with high growth potential
• Growth Stalwart - steady compounders that may deliver steadier rates of growth
• Special Situations - larger conglomerates or businesses trading on a low share price that the manager doesn’t believe reflects their true worth
• Cyclical Growth - companies that could be more sensitive to changes in the health of the economy.

Overall, this means Brett can be categorised as a ‘growth’ investor. That said, he’s flexible and invests in a range of companies with different drivers of growth, and some that are lowlier valued and may not be typical of a growth investor.

Importantly, each business must demonstrate resilience and have an adaptable or durable enough competitive advantage that could help them deliver growth over the next 5-10 years.

At a company level, we think Baillie Gifford has cultivated a culture with a long-term focus, where investors' interests are at the centre of decision making. We also like that fund managers are incentivised in a way that aligns their interests with those of long-term investors. Brett is a partner in the firm, which means he’s well-incentivised for this fund to perform well, as well as to ensure he makes a valuable contribution to the wider business and its success.

While the growth investment style has been out of favour in recent years, we recognise that different investment styles come in and out of favour. Brett has a strong long-term track record, with evidence of adding value through stock picking – the ability to invest in companies that go on to perform well, regardless of what sector they’re in, and without making ‘bigger picture’ economic calls. Overall, it’s important to maintain a diversified investment portfolio, spread across different geographies and investment styles.

We believe this fund could be used to diversify a global investment portfolio and add long-term growth potential or can be used by investors looking for specific exposure to Japan. It could also be used to sit alongside other funds using a value investment style and a focus on companies that have recovery potential.

With the support of an experienced team, we believe this fund has the potential to deliver good long-term returns. As always though, there are no guarantees.

We've also published a full fund update to go alongside this notification.

Past performance is not a guide to the future. Source: *Lipper IM to 31/10/2024.

More on Baillie Gifford Japanese, including charges

Baillie Gifford Japanese Key Investor Information