Fidelity Japan touted as cheap alternative to Baillie Gifford

Fidelity Japan Trust has been pushed as a cheap alternative to a Baillie Gifford investment trust as industry veteran Sarah Whitley prepares to retire.


Fidelity Japan (FJV), formerly known as Fidelity Japanese Values, trades at a double-digit discount of 12%, far behind the 4% premium of Baillie Gifford Japan, a Stifel Funds analysis published on Wednesday said.

Andrew Stern, fund analyst, said since Price’s appointment in September 2015, the trust’s performance has consistently been neck and neck with the returns of Baillie Gifford Japan, with the former beating the latter delivering 100% compared to 95%.

Stern attributed this to premium erosion in the Baillie Gifford investment trust.

Investors switching to Fidelity would benefit from a 15% discount differential and avoid the risks of a new manager at Baillie Gifford when Whitley (pictured) leaves, he said.

“We believe that FJV’s new, cheaper fee structure mitigates many of the investor counter arguments against such a switch,” he added.

Stifel currently holds a  positive rating for Fidelity Japanese and a neutral rating for Baillie Gifford Japan.

Long-term investors

However, not everyone is convinced.

Darius McDermott said both funds are good, but that Baillie Gifford had a long-standing and loyal following “so I would not be promoting selling it”.

However, McDermott added: “Selling a trust on a premium and buying one on a big discount does make sense.”

Jason Hollands, managing director at Tilney, said Baillie Gifford’s team-based approach meant he was “not in the slightest concerned” by the retirement of Whitley. He added her replacement, Matthew Brett, has worked alongside Whitley for a long time.

Manager changes

Whitley’s 27-year reign as lead manager on the Baillie Gifford investment trust comes to an end in April. Brett had been a co-manager on the trust since 2008.

Brett will be supported by Praveen Kumar, manager of Baillie Gifford Shin Nippon, who will become deputy portfolio manager.

Stern said the management changes raised questions about future performance and whether the current premium can be sustained.

“Given the low turnover in the portfolio we do not believe the change will be noticed immediately but over time its impact is likely to be felt. It will be impressive if the new manager can match Sarah Whitley’s track record.”

A repositioned Fidelity Japan

Fidelity Japan has been repositioned to identify itself as “a real alternative” to Baillie Gifford Japan, according to Stifel.

The key changes include the fund transferring into the Japan All Cap sector from the Small Cap Sector, changing its benchmark to Topix TR Index, the same as the Baillie Gifford investment trust, and reducing its management fee.

Investors will now be able to compare the two trusts side by side. Stern said many will question why they are paying a premium for similar performance.

Baillie Gifford has an OCR of 0.78%.

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