Key Morningstar Metrics for Baillie Gifford Japanese Core Growth Fund
- : NeutralMorningstar Medalist Rating
- : AverageProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
Baillie Gifford Japan Income Growth revamped its process and appointed a veteran lead manager from their deep Japan investment desk, whom we continue to like. Previously an income growth mandate, it now follows a core growth approach. It retains a low-turnover fundamental growth approach, but now without the yield requirement and with some additional relative risk guardrails. It continues to earn an Above Average People Pillar rating and an Average Process Pillar rating.
Investment stalwart Iain Campbell now leads on this mandate, supported by Matthew Brett as comanager. They lead on portfolio construction as part of this 10-person Japan team. It is one of the largest Japan equity teams outside of Tokyo, which allows for a wide level of coverage. Campbell has over 20 years of experience and has managed risk-aware strategies such as this before. He believes that a risk-constrained approach is better suited to the Japan market and that the prior yield target had proven to be a detriment to portfolio construction. Like other Baillie Gifford managers, he is a devout growth investor and believes that growth can be found across a variety of company types. This is in line with prior comanager Karen See, who rolled off as comanager in May 2026 but remains on the team, now in more of a pure research role.
Redesigned in the latter half of 2025, the new process was implemented on May 17, 2026. The strategy now aims to provide a smoother ride than in the past, with more explicit and tighter risk guidelines and the removal of the backward-looking relative yield requirement. This is most obvious at the portfolio construction stage of the process. The initial building blocks are unchanged, and research remains bottom-up. The focus remains on finding underappreciated long-term growth across four classifications: secular growth, growth stalwarts, special situations, and cyclical growth. The latter is now much better represented.
Fund performance figures from its July 2016 inception to Aug. 17, 2026, are no longer relevant because of the significant change in approach. It disappointed in recent years, affected by a confluence of negative factors, including weakness in China-exposed names, the weak yen, and a value-driven rally in which the fund did not participate. Going forward, the relative risk constraints should lead to a less volatile ride with a targeted tracking error target of 3% to 5% and some more modest relative position sizing targets. Growth and stock specifics are intended to drive the outperformance target of 1% relative to the Topix.
Baillie Gifford Japanese Core Growth Fund: Performance Highlights
It is far too soon to comment meaningfully on performance.
Under the prior income growth mandate, led by Karen See and Matt Brett, the fund initially fared well but was then affected by a combination of significant headwinds. Volatility was higher than expected. The yield requirement prevented the fund from participating in the broadening of the market’s winners. A weak 2025 was preceded by similarly disappointing years in 2024 and 2023, though for understandable reasons. Similar to other growthier Japan equity funds, relative performance was a victim of the low-quality rally in Japan and notable yen depreciation, which helped areas of the market this fund typically avoids.
Unlike many Baillie Gifford strategies, the managers now pay greater heed to the benchmark when constructing portfolios. Given the growth influence, which is a key part of the firm’s investment style, investors should still expect growth factors to play a role in the performance profile.
The fund now has far greater exposure to cyclical growth and is more diversified than before. This should enable participation in the broadening of market leadership in Japan. The greater appreciation of various risk factors and the lower maximum overweighting should also limit relative volatility. It is too soon to comment meaningfully on performance.
Some key risks include the short track record; investors are relying primarily on the parent franchise track record rather than live evidence of risk-framework execution. While better controlled, currency risks remain, and unhedged sterling exposure to the yen. Yen weakness had been a significant headwind for some of the domestic holdings in recent years. Meanwhile, factor sensitivity does remain. Tighter controls reduce, but do not eliminate, growth/quality factor skew; value and cyclical rotations can create periods of underperformance, especially during junk rallies and exporters. Finally, execution risk: The 3%–5% tracking error target requires active risk management; deviations are still possible over shorter time periods
