Baillie Gifford Japanese Income Growth
Launched in July 2016, Baillie Gifford Japanese Income Growth aims to benefit from the improving corporate governance in Japan, as more and more businesses move towards a progressive dividend-paying policy. The managers apply the same well-tested growth investing philosophy and process used by their other Elite Rated funds, combined with a focus on companies with the best dividend growth opportunities.
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Karen is an investment manager in the Japanese Equities Team at Baillie Gifford, where she has been since 2012. She is a co-manager of the Japanese Income Growth Fund. Karen graduated with a BSc (Hons) in Economics with Japanese from the University of Birmingham in 2011 and is a CFA Charterholder.
Matthew is an investment manager in the Japanese Equities Team at Baillie Gifford, where he has worked since 2003 and became a partner in 2018. He manages the Japanese Fund and related All Cap Strategy segregated accounts, the Baillie Gifford Japan Trust, and co-manages the Japanese Income Growth Fund. Matthew graduated with a BA (Hons) in Natural Sciences (Psychology) from the University of Cambridge in 2000 and holds a PhD in Psychology from the University of Bristol.
Karen is an investment manager in the Japanese Equities Team at Baillie Gifford, where she has been since 2012. She is a co-manager of the Japanese Income Growth Fund. Karen graduated with a BSc (Hons) in Economics with Japanese from the University of Birmingham in 2011 and is a CFA Charterholder.
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Company Description
Founded in 1908 and employee-owned, Baillie Gifford is based in Edinburgh but has offices in London and New York. Awarded the Elite Provider for Equities Rating each year from 2015 to 2021, it specialises globally in equities, fixed income and multi-asset portfolios. The firm is owned by its senior executives and operates as a partnership.
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Quote from the Fund Manager
We tackle the income opportunity through the lens of a growth investor. Picking companies that can grow their earnings over time, as this is the most sustainable way to grow the income stream in the long term.
Karen See
Co-Manager
Investment process
The process is designed to find growing companies that can sustain high returns on their invested capital. The key factor will be for companies to show a competitive advantage versus their competitors and stocks will fall into one of four growth buckets; secular growth, growth stalwarts, special situations and cyclical growth. Analysis will focus on financial strength and a management willingness to grow the dividend. Investments are made with a three to five-year outlook, so a thematic overlay is put on the portfolio to monitor exposure to the long-term trends in the region.
Risk
Investing in Japan always carries high risk. This fund is reasonably concentrated at 45-65 holdings, and will have a natural mid-cap bias. As the team has a total return mindset, rather than a pure income-seeking mandate, it does differentiate this fund and the stocks it will buy. The portfolio therefore can have more high growth style companies compared with its peers, which could see the fund underperform when this style is out of favour.
ESG
ESG - Limited
With this fund, Karen and Matthew take a long-term approach, looking for growth opportunities with firms that are likely to be future leaders. They believe that this long-term approach incorporates a natural bias towards sustainable business models, however this is not a formal policy of the philosophy or process. Material ESG issues that are identified in the analysis will be considered as possible reasons to not invest, but this will be on a case-by-case basis, rather than a systematic approach. There is a strong focus on governance though, with Karen, Matthew and the team having regular engagement with the management of companies already held in the fund and those of prospective holdings.
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