Underperforming JP Morgan Japanese trust stands by strategy

The manager of the JP Morgan Japanese investment trust has stood by his core themes, despite the portfolio’s recent underperformance.

The trust’s financial results for the six months to March 31 show net assets increased by 2.1%, compared with the 3.7% gain seen in the Tokyo Stock Exchange First Section Index benchmark.

Nicholas Weindling, the manager of the £243.6m trust, says Japan’s “steadier growth” companies, such as telecommunication companies and technology names, performed poorly over the six-month period while the export and manufacturing sectors performed well.

Weindling says the trust’s core themes “remain unchanged” and predicts that Japan is well-placed to capitalise on the rapid growth being seen in the emerging economies of the far east.

The trust is positioned to benefit from structural trends in Japan. A recent addition to the portfolio – sheltered housing operator Message – is a play on the country’s rapidly ageing population while the fund has an overweight to retail in anticipation of higher online sales.

Weindling also stands by the trust’s computer gaming theme, as he expects consumers to increasingly move away from traditional consoles and towards playing them through smartphones and, eventually, televisions.

“Stocks in this area, such as Gree, have not performed well recently as the market has been concerned about increasing regulation by the government but we do not believe that the investment case has changed,” he adds.

The manager also defended his bias towards high-quality companies, which showed poor performance in the first quarter as these businesses and defensive stocks struggled in the rising market.

“However, we still expect global growth to be subdued for a protracted period and that only the strongest companies can succeed in this challenging environment,” Weindling says.

The trust’s latest factsheet shows the fund has outperformed more recently, with assets rising by 2.2% in the three months to April 30 against the benchmark’s 0.2% loss.

Furthermore, the trust outperformed over three years but underperformed over one, five and ten years in terms of net asset value.