Which investment trust is the best way in?

BOTH investment trusts JP Morgan Japanese and Baillie Gifford Shin Nippon are seen by investment experts as good ways into the Japanese stock market.

David Coombs is head of multiasset investments at asset manager Rathbones. He uses JP Morgan Japanese to get exposure to the Japanese stock market for the various multi-asset portfolios he runs on behalf of investors.

‘Japan is a stock market where good active fund managers can thrive,’ he says. ‘JP Morgan’s Nicholas Weindling concentrates on identifying out and out growth companies and it’s a strategy that has proved increasingly successful.’

Interactive Investor’s Teodor Dilov is a fan of Baillie Gifford Shin Nippon, describing it as ‘adventurous’. He adds: ‘The manager focuses on a concentrated number of exciting, emerging and disruptive growth companies – typically run by young, dynamic entrepreneurs.’

Baillie Gifford’s expertise in Japan is reflected by the fact that a number of its other Japanese funds are liked by experts. They include Japanese Smaller Companies – run by the same manager ( Praveen Kumar) that oversees Shin Nippon – and Japanese, which has a focus on companies that are global leaders (the likes of games company Nintendo). Other recommendations include Lindsell Train Japanese and AXA Framlington Japan.

Japan is also an option for income seekers, although dividend yields are low at around 2.5 per cent. But coronavirus has not been as disruptive from a business point of view as elsewhere in the world – and Japanese companies are notorious hoarders of cash, which means they have the ammunition to pay dividends if they want to. Preferred funds include Jupiter Japan Income and Morant Wright Nippon Yield, with respective dividend yields of 2.3 per cent and 2.8 per cent.

Anyone looking to buy a Japanese investment fund should ensure it fits into a well-diversified portfolio. It should also be viewed as a longterm investment only.