Baillie Gifford Shin Nippon Share Price Outperforms Despite NAV Lag; Strategic Portfolio Overhaul Underway

Baillie Gifford Shin Nippon PLC (BGS), the investment trust focused on Japanese small-cap growth, saw its share price climb 8.2% in the six months to July 31, 2025.

This performance outpaced the 3.4% increase in its net asset value (NAV) per share, after deducting borrowings. The MSCI Japan Small Cap index increased 7.9% over the same period.

The period was marked by significant internal changes. Brian Lum was promoted to lead portfolio manager, succeeding Praveen Kumar, while Jared Anderson was appointed deputy portfolio manager. These changes, implemented by Baillie Gifford, reflect a strategic realignment of the fund's management.

Positive contributions to the fund's performance came from GA Technologies, Yonex, and Cybozu, driven by strong operational progress.

Conversely, Harmonic Drive Systems, Inforich, and JEOL were key detractors, with Harmonic Drive Systems impacted by reduced investor enthusiasm for humanoid robots, and Inforich and JEOL suffering from disappointing results.

Consistent with a revised investment policy, BGS initiated new positions in DMG Mori and Money Forward, both companies with market capitalizations or turnover exceeding ¥150 billion. In total, five new positions were established, while seven holdings were completely divested. This reflects a dynamic approach to portfolio construction.

Shareholder value has been enhanced through substantial buyback activity. The company repurchased approximately 23.1 million shares, representing around 8.3% of its issued share capital as of January 31, 2025.

Furthermore, the company has secured approvals to cancel its share premium account and establish a distributable reserve. This buyback program underscores management's confidence in the company's future prospects and commitment to returning capital to shareholders.

Macroeconomic conditions in Japan are showing signs of improvement. The apparent conclusion of US-Japan trade negotiations, the re-emergence of inflation, and expectations of monetary policy normalization are creating a more favorable environment for Japanese growth equities. Reduced uncertainty and a renewed appetite for risk should particularly benefit well-managed Japanese smaller companies.

At the end of July 2025, Shin Nippon's total assets stood at £442.3 million, before deducting bank loans of £74.5 million. The fund is managed by Baillie Gifford, a well-established Edinburgh-based fund management group with £206.8 billion under management and advice as of September 4, 2025.

Shin Nippon aims to achieve long-term capital growth through investment principally in small Japanese companies which are believed to have above-average prospects for growth.