Japan Trust Manager Update - Fourth Quarter 2018

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  • 04 mins 40 secs
Matthew Brett, lead manager of the Baillie Gifford Japan Trust, provides an update on the trust and the wider Japanese investment environment in which it operates.

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Baillie Gifford



Tel: 0800 917 4752

Calton Square
1 Greenside Row
Edinburgh
EH1 3AN

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Hello, i'm joined today by matthew brand's, lead manager of the bailey different japan trust welcome, matthew. Hi, alex. I know you've been involved in the management of the trust for a long time, but you took over his lead manager earlier this year hasn't been any change to the philosophy or process, as you'd imagine alex there's been no change to the philosophy of the trust at all. We're focused on trying to find opportunities, and medium and small sized japanese companies were looking for companies that can grow their earnings over the long term. We try and find those companies, invest in on and then be patient. Well, the company's growth been another good year for the trust. What were the main drivers of performance for the main driver of performance ? Was the stock picking, but there was also a positive contribution from the hearing in terms of the individual stocks that helped the performance. One strong area for us this year was the internet related businesses where we had three significant successes. Those were s p i, the online brokerage company cyber agent, which does online advertising on finally digital carriage, which is an internet investor, but we also had things that contributed positive way from different areas for example, kitty tous, which is a real estate business, also sand boil, which does stem cell treatment for historic brain injury. So overall, it was a good mix of different things contributing to the performance, i think it's interesting to note that none of those names are ones that are familiar, especially to people outside of japan, so very much we're looking for opportunities outside of what people might conventionally think off being japan and that's, because that's, where we get the companies with the strongest growth prospects, have you made any changes to the portfolio as usual, the turnover on the portfolio has bean law again well under twenty percent turnover for the year, but we, of course have made some changes. We've also continued to back entrepreneurialism in japan, for example, we took two new holdings this year in companies that were having their initial public offering macari, which is involved in e commerce on the other one is kutty tous, which is a dynamic real estate business. We've also managed to find opportunities and companies that have become more dynamic as a result of changes. Of management in the fairly recent past, for example, no cookie rise up and also jeff call fall into this category, so in addition, we find new opportunities in existing strong franchises that still have significant growth ahead of them. So for examples in cocoa horseshoe, which is a financial company, satel holdings which those barcodes and our chips and sherman knew which does bicycle components. So i think, there's a lot of individual stocks were very excited about at the moment. Sounds like there's some interesting opportunities at the stock level what's the overall investment environment, like in japan ? Well, the overall investment environment has become a lot more normal in recent years. So for example, the corporate governance changes that have been put in place in the stewardship court mean that companies are more focused on the shareholders than in the past. We've seen a train towards increasing dividends, and that's come through his increased investment income for the trust. In addition, we've got a stable political backdrop, with mr abbott being in power for a number of years on all of these things just mean that the overall environment for us is stock pickers is a lot. More normal than it was in the past, and therefore less of a distraction for picking the stocks. The other big change is that we've noticed that people are no longer using the word deflation about japan. And this has been a problem which has played japan for for many years. But we think the combination off the demographics of japan and the very tight labor market on the stronger domestic economy. I mean that really deflation is a matter of the past now and not the future. And as a consequence, we end up with a nice, stable investment environment for us to pick stocks. Sounds like an exciting time to be managing the trust. Matthew, thanks very much for joining us. Thanks, alex.

 

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