17th Sep 2025 12:25
(Alliance News) - Baillie Gifford Shin Nippon PLC on Wednesday reported a "frustrating" result during the first half of its current financial year, as net asset value improved but its total return fell short of the performance on its benchmark index.
The Japan-focused investment trust said net asset value per share at July 31 was 143.4 pence, up 2.9% from 139.4p at January 31.
A top contributor was GA Technologies, whose tech-focused real estate platform "is rapidly gaining share," Baillie Gifford said.
A key detractor was Harmonic Drive Systems, a maker of robotic components, after a cooling of investor excitement to humanoid robots.
NAV total return for the six months to July 31 was 3.4%, outperformed by a 7.9% return on the company's benchmark index, the MSCI Japan Small Cap Index. Baillie Gifford had reported a negative 5.1% return in the year to January 31.
Pretax net return for the first half was GBP7.4 million, swung from a net loss of GBP30.5 million the year before. This was driven by GBP4.2 million in net gains on investments for the six-month period, against GBP34.7 million in losses a year prior.
"With US-Japan trade negotiations now seemingly concluded and agreed, inflation re-establishing itself and expectations of further monetary policy normalising, macro-economic conditions in Japan appear to be improving. This should provide a tailwind for Japanese growth equities," said Chair Jamie Skinner.
"In addition, reduced uncertainty and a return of risk tolerance should prove beneficial to well-managed Japanese smaller companies. As the only growth-focused Japan small cap investment trust, Baillie Gifford Shin Nippon should be increasingly well-placed to capture the opportunities presenting themselves."
Baillie Gifford noted the vulnerability of small cap companies to "investor risk appetite and sentiment", and said it was "frustrating that Baillie Gifford's investment approach has not resulted in better outcomes".
As a result "a number of measures have been implemented to strengthen the investment process, such as small cap specific discussions with a wider set of colleagues and closer engagement with the investment risk team", the company said.
Shares in Baillie Gifford Shin Nippon were down 0.5% at 135.19 pence in London on Wednesday afternoon. The stock has risen 16% over the past year.
By Emily Parsons, Alliance News reporter
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