We're currently experiencing extremely high call volumes. We're very sorry for any inconvenience this might cause. If you need help with your account, please visit our Help Centre, or email us and we’ll get back to you as soon as we can. For more information and tips on managing your account online please visit www.hl.co.uk/coronavirus

We’re experiencing high call volumes, please check FAQs before calling.

Skip to main content
  • Register
  • Help
  • Contact us
  • Log out of your HL account

Baillie Gifford Shin Nippon - harnessing disruption

Baillie Gifford Shin Nippon – harnessing disruption Dominic Rowles, Investment Analyst, reports on Baillie Gifford Shin Nippon's annual results for the year to 31 January 2019.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • NAV fell 6.1% compared with a 7.8% fall for the trust’s benchmark
  • Share price fell 7.2% 
  • The trust's longer-term track record is more positive
  • Trends like automation and electrification of cars could yield opportunities for smaller companies

Smaller companies are some of the most exciting around. They can be pioneers of industry, and adapt quickly to take advantage of new opportunities. But they often go overlooked by investors who don’t have the time or resources to research them.

Praveen Kumar, manager of the Baillie Gifford Shin Nippon Trust, scours the Japanese stock market for high-quality smaller companies with strong senior management teams and outstanding growth prospects. You should remember that smaller companies are higher-risk than larger ones though.

He's managed the trust since December 2015 and it's done well under his tenure. An investment of £10,000 when he started managing the trust would be worth £20,439*. Past performance shouldn’t be seen as a guide to the future though.

Annual percentage growth
Feb 14 -
Feb 15
Feb 15 -
Feb 16
Feb 16 -
Feb 17
Feb 17 -
Feb 18
Feb 18 -
Feb 19
Baillie Gifford Shin Nippon Trust 3.9% 39.2% 34.9% 55.5% -8.6%

Past performance is not a guide to the future.Source: *Lipper IM to 28/02/2019

The trust’s use of derivatives and high level of gearing (borrowing to invest) mean performance can be volatile. Please see the latest annual report & accounts and Key Information Document for details of the risks and charging structure.

The disruptive potential of smaller companies

Smaller companies often provide innovative products and services which enable them to poach customers from large, slow-moving businesses.

Bengo4.com is a great example. It runs a website that connects lawyers with people and businesses in need of legal advice. About a third of Japan's lawyers are now registered members. It's also leading the way in cloud-based contracts that can be securely signed. The company was the trust's best-performing investment over the year.

Uzabase is a more recent investment. It's a financial software company that's trying to disrupt a market dominated by Bloomberg and Thompson Reuters through its own low-cost service. It's got a huge database of private companies in Asia and is quickly winning business from its competitors in Japan. Its original content written by a panel of industry experts differentiates it from competitors.

Not all smaller companies will be successful though and many will fail altogether. It's one of the things that makes them higher-risk. High-end rice cooker maker Zojirushi was sold from the trust amid concerns it was struggling to cope with increasing competition.

Manager's outlook

Concerns are emerging about the health of the global economy. But Praveen Kumar won't be distracted from his investment process. He thinks the prospects of the companies he invests in are more tied to their ability to disrupt competitors than the global economy.

He believes trends like automation and the electrification of cars could provide opportunities for smaller companies in the future. There's also a drive to improve corporate governance across Japan. This helps put investors' interests at the forefront of corporate decision-making.

Key Information Document

More on this trust, including charges

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Daily market update emails

  • FTSE 100 riser and faller updates
  • Breaking market news, plus the latest share research, tips and broker comments
Register

Related articles

Category: Investment Trusts

Mark Barnett to step down from Perpetual Income & Growth

The Board of Perpetual Income & Growth Investment Trust has decided to replace Mark Barnett as investment manager.

Kate Marshall

06 Apr 2020 3 min read

Category: Markets

Asia & Emerging Markets update – what’s different in the developing world?

Containment efforts in parts of Asia look to be working, but other developing economies, like those in Latin America, are struggling.

Kate Marshall

24 Mar 2020 17 min read

Category: Investment Trusts

Two investment trusts that don’t cost the Earth

2019 was the year sustainability and ESG went mainstream. In this article, we take a closer look at two investment trusts with very different approaches to investing responsibly.

Dominic Rowles

04 Mar 2020 3 min read

Category: Investment Trusts

Alternative investments: A look at private equity

Buying stock market shares isn’t the only way to invest in companies. Jonathon Curtis explores the risks and potential rewards of private equity investing.

Jonathon Curtis

18 Feb 2020 3 min read