Lindsell Train Global Equity swaps Japanese exchange for Universal Music Group

investmentweek.co.uk:

In the monthly report for the fund, co-portfolio manager James Bullock, said the firm has questioned the sustainability of the company’s trajectory for some time.

According to the fund's January factsheet, co-portfolio manager James Bullock said the firm has «questioned the sustainability» of the company's trajectory for some time. 

One of the fund's holdings since its 2011, JPX has become one of the strategy's top performers with an annualised 17.2% return in sterling during the period. 

However, the «healthy» performance has not been a «smooth line», given «big chunks» of returns were delivered between 2013 and 2015 as the Osaka Stock Exchange merged with the Tokyo Stock exchange, improving efficiency and creating a retail trading boom.

Lindsell Train names deputy portfolio manager of £4.6bn Global Equity fund

Bullock said that while it was not a «struggling company» the managers said they are ultimately looking for «durable growth, directed by deep-moated companies that go out and make their own luck».

«The large boost to earnings unlocked by the Osaka-Tokyo merger was triumphal, but also a one-time event,» he added, while noting that any similar future consolidation would require overseas partners, but cross-border deals with exchanges are «difficult to execute».

Additionally, JPX has not merged with any other index or data services, perhaps due to having its «hands tied by a conservative regulator», Bullock said, meaning that a majority of revenue comes from trading and clearing services.

He explained that the company's growth depends on the level of activity in the Japanese stock market. Therefore, despite the long-term potential of major developed markets, «extreme cyclicality has overlain this rewarding trend».