uploads///Portfolio Break down of the BIAJX

The Brown Advisory-WMC Japan Alpha Opportunities Fund (BIAJX): Overview

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Oct. 23 2015, Updated 4:04 p.m. ET

An introduction

The Brown Advisory-WMC Japan Alpha Opportunities Fund (BIAJX) seeks “to achieve total return by investing principally in equity securities issued by companies established or operating in Japan, while limiting exposure to fluctuations between the value of the Japanese yen and the US dollar.” The fund also states that at least half of its exposure to the Japanese yen is hedged at all times.

The fund does not target any specific segment in terms of market capitalization. Instead, it intends to be “benchmark agnostic.” What this means is that it does not intend to replicate its benchmark, although the fund’s performance is benchmarked to the TOPIX Total Return US Dollar Hedged Index. A comparison of BIAJX’s portfolio with this particular benchmark shows a significant difference between percentage weight allocated to the consumer staples, industrials, and information technology sectors, as the graph below shows.

The fund is quite diversified with 214 holdings as of September 2015 and was managing assets worth $2.25 billion. But keep in mind the following:

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  • The fund’s cash and equivalents holdings (which includes investments in liquid funds), to a degree, was offset by its exposure to equity index futures.
  • As of September 2015, the fund’s top equity holdings included Mitsubishi UFJ Financial Group (MTU), Mizuho Financial Group (MFG), Takeda Pharmaceutical Company (TKPYY), and Honda Motor Company (HMC), which together make up 8.1% of the fund’s portfolio.

Historical portfolios

For this analysis, we’ll be considering holdings as of June 2015, because that is the latest available sectoral breakdown available to us. The holdings post June reflect the valuation-driven changes to the portfolio, not to the actual holdings themselves. But keep in mind that the fund discloses portfolio holdings once every quarter.

As you can see from the graph above, the fund has been quite consistent in terms of portfolio composition. This is the case not just for the seven months plotted in the graph but also for the past year. The fund’s managers increased the portfolio’s exposure to the consumer discretionary sector between March and June 2015 while its exposure to cash equivalents came down. Another significant decision managers made was to completely exit the utilities sector in June. Exposure to the materials sector declined during the period.

But how did the fund’s composition impact its performance in September 2015? Continue to the next part of this series to find out.

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