The Commonwealth Japan Fund (CNJFX) fell by 5.8% in September 2015 from the previous month. In the three- and six-month periods ending September 30, the fund has fallen by 7.5% and 8.1%, respectively. However, in the YTD (year-to-date) period, the fund is up by 1.7%.
The fund’s performance in September placed it as an above-average performer. It was also the second-least decliner among the nine funds we’re analyzing in this series for the quarter ending September 30. However, in the other periods, it was among the worst performers.
Let’s look at what has contributed to this performance.
Portfolio composition and contributions to returns
The CNJFX has the longest history among the nine Japan-focused mutual funds we’re reviewing, having been created in July 1989.
The latest complete portfolio information available for the fund is as of June 2015. So we’ll take that portfolio as our base for our analysis and consider valuation changes as they stood at the end of September 2015.
All portfolio percentages mentioned from here on will refer to weights according to changes in valuation from June to September. Below is a breakdown of the fund’s holdings:
- The industrials sector is the biggest sectoral holding of the CNJFX, making up 32.5% of the total portfolio.
- Financials follow, with a portfolio weight of 14.3%, closely followed by stocks from the health care sector, which make up 14.2% of the fund’s assets.
- The fund has a sizable exposure to funds—including an ETF —as well.
- The fund does not have any exposure to stocks from the energy or telecom services sectors (NTT) (DCM).
The following is a breakdown of contributions in September 2015:
- Healthcare was the biggest negative contributor. Among the three stocks comprising the sector, Asahi Intecc was by far the biggest negative contributor to returns.
- Industrials followed the healthcare sector. Of the 19 stocks that belong to this sector, all but two contributed negatively to the fund’s overall returns. Industrials were led down by East Japan Railway Company. Kajima Corporation and Fanuc Corporation (FANUY) were also among negative contributors to the fund’s returns.
- Financials followed, led down by Dai-Ichi Life Insurance Company. Other detractors included T&D Holdings and Mizuho Financial Group (MFG).
Reasons for performances
For the one- and three-month periods ending September 30, CNJFX was helped by the fact that health care, which is only the third-largest sectoral holding, was the biggest negative contributor to returns—not the industrials sector. However, this exact composition hurt the fund in longer periods, with industrials contributing sizably to the overall negative returns of the fund.
Investors should note that the fund has a small asset base, thus restricting its managers’ ability to make changes to its portfolio. It would not be incorrect to say that fortune rather than active management has kept the fund’s short-term performance in the top half of the nine funds in this review.
Now let’s move on to the Hennessy Japan Fund Investor Class (HJPNX) in the next part of this series.