Baillie Gifford Shin Nippon | Winterflood Research

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Staying the Course Despite Size and Style Headwinds

Background: Baillie Gifford Shin Nippon* has been managed by Praveen Kumar since November 2015 and aims to achieve long-term capital growth from a portfolio of high-growth, small-cap Japanese companies. The Board recently introduced a performance-related tender offer for up to 15% of share capital if the fund underperforms the MSCI Japan Small Cap Index over the three years to 31 January 2027. On 25 March we met with Praveen Kumar following the publication of the fund’s annual results to 31 January 2024.

Portfolio: The portfolio contained 76 holdings at the end of January, of which four were unquoted (4% of assets vs 10% limit), while the top ten holdings accounted for 24% of the portfolio as at 29 February. The manager’s long-term approach is reflected in the fact that 55% of holdings have been in the portfolio for more than five years, and the active share is high at 95%.

Performance: Since the appointment of Praveen Kumar as manager, Baillie Gifford Shin Nippon has generated a NAV total return of +72%, underperforming the MSCI Japan Small Cap Index (+83%). This is primarily as a result of underwhelming absolute and relative returns since the end of 2021, with the fund’s high growth and small cap bias facing style headwinds.

*Denotes a corporate broking client of Winterflood Securities

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