‘Owning an airline as Covid-19 hit really hurt us’

First-time manager Masaki Taketsume tells Jonathan Jones how he will end years of poor returns for Schroder Japan Growth investors

Investing in stock markets can be a rocky ride, but for investors in the Schroder Japan Growth investment trust it has been particularly so. The trust was run by veteran fund manager Andrew Rose until July 2019, when he retired and handed over the reins to first-time fund manager Masaki Taketsume.

He started in difficult circumstances. The trust has lagged its rivals over three years, leaving the manager with much ground to make up. After a difficult 2020, the fund has been making a comeback this year. The shares have risen by 10pc in 2021, the largest gain of any investment trust focused on Japan’s stock market.

Mr Taketsume tells Telegraph Money why the trust has struggled for the past few years and what has brought about its revival.

WHO IS THE FUND FOR? Investors who want to own Japanese stocks benefiting from the structural change taking place in the country. Businesses are adapting and becoming more focused on shareholders and returns, rather than simply keeping companies alive.

WHAT MAKES YOU DIFFERENT? We look at companies rather than sectors and use resources such as our research team in Tokyo, which has a lot of experience in the Japanese market. They can spot companies that are undergoing change immediately.

We have a relatively diversified portfolio of around 70 stocks, focusing on companies whose managements have a mindset of improving shareholder returns.

HOW DO YOU PICK STOCKS? First of all, we look for companies whose shares are cheap. Secondly, we look for a catalyst for that changing, such as a new management team that could unlock the value of a business.

Lastly, we are more focused on small and medium-sized companies. These firms aren’t as well researched by

Markets Hub

See live financial data and build your own portfolio with our interactive investment tool

telegraph.co.uk/ markets-hub investors, which amplifies our advantage with the team we have.

SHOULD INVESTORS WORRY THIS YOUR FIRST TIME RUNNING A FUND? I have worked on the fund since 2013 as an analyst but became its manager, taking over sole responsibility, in 2019. For me this is a great opportunity, but for the fund it is a natural progression rather than a drastic change.

The process is the same as it was under Andrew and we had been preparing for this transition for quite some time, so it is not something that has suddenly happened overnight, either for me or the fund.

The best thing I learned from Andrew as I watched him over the years was to maintain discipline but to act swiftly when you do make changes.

WHY ARE THE THREE-YEAR RETURNS SO POOR? Momentum and growth investing has been outperforming our value style. Also, the market has been dominated by a small number of stocks.

We don’t think that kind of trend is a structural change, so given the huge valuation gap between momentum and value stocks, we think our approach will work well over the long term.

We are also optimistic about the big changes taking place in some of the companies we own, whose management teams are making a real effort to improve returns to shareholders over the long term.

WHAT HAS BEEN YOUR BEST INVESTMENT? Since I took over the fund in July 2019 the best stock pick has been Ibiden. This is a company that makes the casing used for semiconductors, whose products are used for the likes of Intel’s processors.

Thanks to the rising price of this packaging and the management’s efforts to reallocate spending from loss-making parts of the business, we expected profitability to improve.

This turned out to be the case and the share price is up almost 200pc since we first made an investment.

AND YOUR WORST? Japan Airlines was hit hard by the pandemic, but on top of that it had increased its spending right before Covid- 19 to take advantage of a rise in capacity at Tokyo’s Haneda airport, which was unfortunate timing.

Even after Covid-19 we were concerned that it would take a long time to optimise the business so we sold out, but the shares had fallen by around 47pc before we did so.

HOW ARE YOU PAID? I get paid a base salary and performance-based bonuses, which are directly linked to the fund’s returns.

DO YOU HAVE YOUR OWN MONEY IN THE TRUST? Yes, I do invest my own money in the fund.