The managers of JPMorgan Japanese (JFJ ) are doubling down on ‘growth’ stocks and a bet on elusive technological transformation in the country despite their ‘disappointing’ performance in this year’s violent rotation.

The stockpickers running the £720m investment trust, Nicholas Weindling and Miyako Urabe, have tried to increase exposure to what they see as the highest quality end of the market, after underperforming the Tokyo Stock Exchange (Topix) benchmark by more than 15% in the six months to the end of March. 

Over the volatile period, the shares traded in a range from a 2.7% premium to a 9.5% discount to portfolio value, closing at a 6% discount. Since March, the portfolio has returned -9.6%, falling further behind the index, returning -3%, with the shares’ discount widening to 7%.

‘This near-term performance is disappointing, but is the result of the same quality and growth focus in [our] holdings that has underpinned the company’s long-term record of strong absolute returns and outperformance,’ Weindling and Urabe (pictured below) wrote.

The managers have rejigged the 1.1%-yielding trust, adding several names at cheap valuations as market volatility continues. The losses have been broadly in line with the similar open-ended funds Weindling (pictured below) manages, JPM Japan and JPM Japan Equity , both of which have lost more than 20% this year .

New positions for the trust include industrial gas company Nippon Sanso, which is expected to benefit from its new management team at parent company Mitsubishi Chemical. Since the end of March, the shares are up 4.7%.

They bought Kissei Pharmaceutical, which has three new drugs approaching approval and a strong balance sheet, with the shares up 11.7%.

‘The recent sell-off in growth names has generated opportunities to increase our exposure to some premium and quality rated names at more attractive levels,’ the managers said.

The electric appliances sector now holds a 20.9% weighting, overweight its benchmark by 2.7% according to the factsheet. The second-largest sector weighting, information and communication, constitutes 16.3% of the portfolio, overweight the index by 8%.

The managers took some profits one of the half year’s top detractors, Recruit, which returned -25.4% to the end of March, followed by a further fall of 14.7% by mid-May. Having first bought it in February 2017, they continue to hold the stock.

Other shares where the weighting was trimmed after previous gains included electric components company Tokyo Electron, whose shares traded up 21.1% in the six months to the end of March, ecommerce company MonotaRO, semiconductor producer Lasertec and M3, a provider of online medical information.

‘The onset of the pandemic accelerated many digital trends such as the rising popularity of online shopping and gaming, cashless payments and cloud computing,’ said the duo.

‘However, this theme still has a very long way to run, as Japan’s take-up of digitisation across many sectors continues to lag that of other countries.’

Outright sales included e-commerce portal Mercari due to rising competition and Modalis Therapeutics due to disappointing progress with drug developments.

The managers also sold Renova, a leading player in Japan’s renewable energy market, with ‘some regret...following its failure to secure an offshore wind contract in circumstances where price competition raised serious questions about the viability of the sector’.

According to the April factsheet, the top holdings at the end of April include electric appliance company Keyence, Sony, and precision instruments company Hoya, with a combined portfolio weighting of 18.5%.

The closed-end fund boasts strong long-term performance with shareholders enjoying a 253% return over the 10 years to 30 May, versus 151% for the benchmark, according to Numis Securities.