High-growth portfolio looking cheaper: JPMorgan Japanese Investment Trust

Increased focus on companies embracing reforms to governance and capital efficiency has seen JFJ outperform its index…by Josef Licsauer

Overview

Japan’s corporate transformation is expanding the opportunity set for active managers, something JPMorgan Japanese’s (JFJ) newly formed Managementtrio, Nicholas Weindling, Miyako Urabe and Xuming Tao, have been keen to capture. Amid this changing backdrop, they have increased focus on the companies that are embracing governance reforms, raising corporate standards and improving capital efficiency.

Whilst the managers remain committed to targeting high-quality, growth-oriented companies with durable competitive advantages and strong balance sheets, they’ve seen a broadening in their opportunity set, which they believe can support capital growth and sustained outperformance for shareholders over the long term. Consequently, this prompted several Portfolioadjustments over the past 12 months, including new positions in slightly more cyclical industrial and financial names such as IHI Corporation and Mitsubishi UFJ Financial Group. Following its combination with JPMorgan Japan Small Cap Growth & Income (JSGI) in October 2024, the trust has also sharpened its exposure to niche, under-researched smaller company opportunities, retaining six former JSGI holdings that bring differentiated characteristics to the portfolio.

Over the past five years, JFJ’s growth-oriented style has been challenged by value’s sustained outperformance in Japan. The trust notably underperformed in 2022, when growth sold off and value sectors, particularly financials, rallied. However, Performance has rebounded. Over the 12 months to 28/07/2025, JFJ delivered a NAV total return of 24.8%, outperforming the TOPIX return of 10.0%, aided by its increased focus on companies embracing, but also benefitting from, governance reforms.

At the time of writing, JFJ trades on aDiscountof 10.0%, a marked shift from the 15% it reached earlier this year, though still slightly wider than its five-year average of 7.2%.

Analyst’s View

 
We think that Japan continues to look like one of the more compelling long-term opportunities in global equities. Positive real wage growth, ongoing corporate reform and stronger shareholder alignment are helping reshape the market and expand the opportunity set for active managers. Whilst short-term challenges persist, Japan’s recent trade agreement with the US helps ease policy uncertainty, which could support an otherwise encouraging economic trajectory.

In this environment, JFJ may offer investors a focussed route into Japan’s evolving growth story. Over the past year, the trust has sharpened its positioning, increasing exposure to companies demonstrating governance improvements, greater capital efficiency and more productive use of their cash-rich balance sheets. Sector exposures have shifted modestly, with greater allocation recently to financials and industrials, areas where the managers see positive reform-led momentum. This more deliberate focus has contributed to the trust’s 14.8 percentage point outperformance of the TOPIX Index over the past 12 months.

Whilst the strategy remains anchored in high-quality, growth-oriented stock selection, Japan’s corporate transformation has broadened the pool of investable opportunities. The managers describe this as an expansion of their universe rather than a shift in style, though it may lead the portfolio to behave slightly differently over time. A modest increase in cyclical exposure, for example, could heighten sensitivity to global trade dynamics or short-term economic shifts.

That said, JFJ’s current discount, still wider than its five-year average, could offer investors an attractive route to Japan’s evolving growth story. Whilst near-term risks remain, including political volatility and lingering trade outcomes, particularly around autos and export-sensitive sectors, sustained performance and improving fundamentals could help narrow the discount over time, adding a potential kicker to long-term returns.

Bull

• On-the-ground research team offers good coverage of the market and an advantage in stock selection
• Current discount is wider than its five-year average, potentially attractive for long-term investors
• Japanese equities look attractively valued versus global peers

Bear

• Growth style bias may lead to periods of underperformance in value-led markets
• Use of gearing can magnify the losses in a market downturn
• Investors take single-country political, currency and economic risk

See the full research on JFJ here >
 

 
_{Disclaimer This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.}