Lindsell Train Japanese Equity
1-year return: 20.7% | 3-year return: 74.2%
Lindsell Train Japanese Equity is a first-time winner in our awards, but has been a Money Observer Rated Fund since 2016. A consistently strong performer, the £230 million fund has outstripped the IA Japan sector by 12.5 per cent over the past year and 32.8 per cent over three years.
A Dublin-registered fund, it has been run by Michael Lindsell since 2004. His aim is to construct a concentrated portfolio of exceptional companies, with a focus on those firms with truly sustainable business models and/or established resonant brands. In building the portfolio he focuses on companies demonstrating longterm durability in cash and profit generation.
This is evident in the fund’s two largest holdings – Kao, a household product provider, and Nintendo. Kao holds at least a top-three position in every major toiletry and laundry category in Japan. Nintendo, meanwhile, is responsible for most of the best-selling games of all time. Its share price soared more than 50 per cent in the first half of 2017 following the successful launch of its new console, the Switch.
The portfolio is very concentrated with typically only 20 to 35 holdings. This is reflective of Lindsell’s belief that only a very limited number of companies meet his requirements, but those that do he holds for the long term.
HIGHLY COMMENDED FUND
Baillie Gifford Japanese Smaller Companies
1-year return: 35.4% | 3-year return: 101.3%
This fund is easily the top performer in the IA Japanese smaller companies sector and also ranks highly across all Japanese equity funds. It has superior risk-adjusted returns to our award winner in this category over the past one and three years, but picks up our highly commended title due to a period of underperformance in 2016. The fund took our highly commended title in 2016, but lost its shine later that year when it sank to the fourth quartile of its sector.
Run by Praveen Kumar and Felicia Hjertman, the fund adopts the same focus on long-term growth and companies that have the potential to disrupt their sectors as other Baillie Gifford funds. The managers invest in attractively valued smaller companies that they believe offer good growth opportunities.
Growth may come from innovative business models, disrupting traditional Japanese business practices, or market opportunities such as growth by Japanese companies outside Japan. At the end of March some 30 per cent of the fund’s £742 million of assets was invested in technology stocks.