A fresh Baillie Gifford investment trust has slipped in the FTSE 250 thanks to the merger of an existing constituent.
The £711m Baillie Gifford Shin Nippon investment trust becomes the fifth product from the Edinburgh-based fund house to enter the FTSE 250. Baillie Gifford US Growth Trust was the asset manager’s last investment trust to join the index in the latest rebalance in September.
The change would be effective from Friday and comes into effect following the merger of FTSE 250 constituent SDL with Aim-listed RWS Holdings.
Managed by Praveen Kumar (pictured), Baillie Gifford Shin Nippon is the top-performing investment trust in the AIC Japanese Smaller Companies sector over one, three and five years.
It had previously sat in the FTSE Small Cap index and will be the only investment trust from its sector in the mid-cap index. From the AIC Japan sector, Baillie Gifford Japan and JP Morgan Japanese both already feature in the FTSE 250.
Other Baillie Gifford funds to sit in the FTSE 250 include Japan, US Growth, Edinburgh Worldwide, Monks and the Scottish American investment trust. Additionally, Scottish Mortgage is famously one of the only investment trusts to feature in the FTSE 100.
In the year to date, Kumar’s investment trust has returned 40.4% compared to falls of 1.6% in the MSCI Japan Small Cap index. The sector has delivered returns of 9.6% over the period.
It is currently trading at a 3% premium compared to an average 3.95% premium over the last 12 months, according to Hargreaves Lansdown data.
Baillie Gifford Shin Nippon performance (%)
| 6m | 1yr | 3yr | 5yr | |
| Baillie Gifford Shin Nippon | 60.01 | 41.06 | 55.67 | 227.07 |
| IT Japanese Smaller Companies sector | 28.36 | 14.53 | 21.45 | 114.90 |
| MSCI Japan Small Cap index | 13.01 | -0.22 | 2.79 | 70.43 |
Source: FE Fundinfo
Baillie Gifford Shin Nippon attributed strong performance in the first part of 2020 to stocks like Bengo4.com and Demae Can, currently its top holdings, with each representing 4.4%, according to its most recent interim report, which covered the six-month period ended 31 July.
The former is an online legal portal, which has been aided by its cloud-based digital contracts business, Cloudsign, as the Japanese government uses the pandemic to encourage companies to shift away from paper contracts. The latter is Japan’s leading food delivery company, which has rapidly expanded its geographical footprint in contrast to competitors like Uber Eats that are focused on metropolitan areas.
Online drug marketing platform M3 and trade receivables insurance provider eGuarantee were also touted as beneficiaries of the pandemic.
In contrast, the largest detractors from performance were in sectors disrupted by the Covid-19 pandemic and lockdown, such as physical retail, travel and manufacturing. These included cosmetics retailer iStyle, travel operator H.I.S and staffing company Outsourcing.
The interim report concluded: “Although the pandemic has caused widespread disruption to businesses and societies globally, it is also serving to accelerate much needed and long overdue changes in the way businesses operate. This is true perhaps more so in Japan than anywhere else given its corporate culture that is steeped in outdated business practices.”
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