Baillie Gifford Japanese Income Growth Manager See Stands By Softbank

The company lost $6.2bn when WeWork filed for bankruptcy at the start of the month, in which SoftBank had invested in 2017. In 2021 it helped cut a deal to take WeWork public via a merger with a blank-check acquisition company.

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But See stood by SoftBank's leader: "We think that Son, unlike some press coverage would have it, is actually of one of the best capital allocators in Japan."

"He has actually made a lot of very good investments over the longer period," she argued, noting that unfortunately "a lot of the failures are very public and very highly visible".

See pointed to Alibaba and Arm, as well as bets within the Indian internet space, that had paid off, along with AI, a theme SoftBank is "very well positioned" to benefit form.

The firm is also "trading at a discount to the sum of its parts", she noted, and had bought back a "huge amount of shares" in recent years.

SoftBank is the sixth largest holding in the £492m income fund, comprising 3.3% of the portfolio.

Corporate reforms

See noted there had been "a bit of a Japan rally since the start of the year", as the country had been going through a period of corporate governance reform.

This has led to a lot of the "cheaper companies" growing far beyond the benchmark, which See attributed to the poor performance of the fund relative to the benchmark.

The fund has lost 9% over the last three years, while the TSE Topix index has offered 7% returns over the period, according to data from FE fundinfo. The average IA Japan has returned 4.5% during the same period.

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See pointed to the banking sector as an example of weaker stocks rallying, a "prime example" of low price to book ratio, stating they had rallied about 40% in the last six to eight months.

"We think that is a one off, now the landscape has improved, and that is priced in already," she explained.

Despite this, See argued the incoming reforms were set to lift the Japanese economy as a whole.

"The most important thing about the corporate governance change and why the regulator has tried to push for it is they believe value that can be unlocked by having a more independent board, challenging management, making decisions, having them allocate the capital more efficiently and having more focus on shareholder returns," she argued.

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