JPM JAPAN C

Investment Process

The fund seeks to identify high-quality companies in Japan with superior and sustainable growth potential. Nicholas Weindling, managing director and country specialist for Japan equities and a member of the Japan team within JP Morgan’s Emerging Markets and Asia Equities team based in Tokyo, begins the process by asking himself – “Do we want to own this company over the long term?”. He targets companies with sustainable return on equity, pricing power, competitive advantage, a strong balance sheet and shareholder-focused management teams. The stocks are categorised into premium, quality or trading based on the economics, growth structure and governance of each company. Stocks are then rated on their expected performance by considering risks and valuation on a scale of 1 to 5, with 1 being the highest. Most of the portfolio holdings are rated as premium and quality. Weindling believes that Japan is at least 20 years behind the West in terms of digitisation and trends such as e-commerce, cloud adoption and cashless payments. As such he looks for firms which will lead Japan’s transformation and benefit from other long-term structural trends, such as an ageing population and emerging middle class. The fund has little or zero exposure to what he believes are more challenged sectors in Japan, such as banks and transportation equipment. The portfolio has between 40 and 80 holdings with an investment time horizon of between 3 and 5 years. It can be split into seven main themes including Internet, Japanese Brands and Automation.