Baillie Gifford Japan (BGFD) owns a portfolio of Japanese equities chosen for their explosive growth prospects. The Japanese Equity Team at Baillie Gifford, with Matt Brett taking the lead manager role since 2018 (see Management), aim to find companies they believe can double in value over five years, and build a portfolio of their highest-conviction ideas, paying no attention to any index. Matt, deputy manager Praveen Kumar and the team are rigorously active in their approach. Right from the idea-generation stage to the stock-selection decision, the intention is to look through the noise of market movements, investor trends and short-term earnings and valuations to focus on the long term. While the main investment horizon is five years, in practice the average holding period is closer to a decade, with the team having delivered exceptional returns by correctly identifying companies with huge return potential and holding on as they compound their advantages. As we discuss in the Portfolio section, BGFD has more than doubled the returns of the TOPIX Index over the past decade, and is far and away the best-performing Japan trust over that time. Matt and the team are flexible in their approach to growth. The Japanese market is highly cyclical, and BGFD owns plenty of cyclical companies which meet their long-term growth potential target, with companies like tyre manufacturer Bridgestone sitting alongside tech incubator SoftBank. What unites them is the potential for exceptional returns over the long run. This year (2021) has been more difficult for BGFD. A preference for value over growth at the start of the year and some stock-specific issues have seen it underperform the market over 12 months. As a result, the shares have fallen from a significant premium to trade close to par.