The Matthews Japan Fund – Investor Class (MJFOX) fell 0.4% in December 2015 from the previous month. In the three- and six-month periods ended December 31, the fund rose 10.4% and fell 1.2%, respectively. In the one-year period that we will analyze, the fund has returned a superlative 20.8%. From the end of December until January 28, the fund has fallen 6.8%.
The fund had a stellar 2015 and emerged as the best performer among the six funds in this review. Let’s look at what has contributed to this strong performance.
Portfolio composition and contribution to returns
Founded in December 1998, MJFOX has seen several market cycles. Because the latest available complete portfolio of the fund is as of September 2015, we will consider that as our base. For September–December 2015, we will consider valuation changes for our analysis. All portfolio percentages mentioned from here on will refer to their weights according to changes in valuation from September to December.
Industrials, the biggest invested sector of MJFOX, was the largest contributor to the fund’s returns in 2015. Benefit One Inc. and Nihon M&A Center Inc. led the sector up. Other positive contributors included Fanuc Corporation (FANUY), Nidec Corporation (NJ), and Mitsui & Co. Ltd. (MITSY). However, Komatsu, Nabtesco Corporation, and Mitsubishi Heavy Industries emerged as potent detractors.
Healthcare followed industrials and was led by Asahi Intecc Co Ltd. and Sysmex Corporation. However, N Field Co. Ltd. and Daiken Medical Co. Ltd. reduced some gains from the sector.
Telecom services hurt the fund’s returns, primarily due to the performance of SoftBank Group Corp. (SFTBY).
Other positive contributors included ORIX Corporation (IX), Mitsubishi UFJ Financial Group, Inc. (MTU), and Bridgestone Corp. (BRDCY). Meanwhile, negative contributors included Sumitomo Mitsui Financial Group, Inc. (SMFG), Fuji Heavy Industries Ltd. (FUJHY), and Hitachi Ltd. (HTHIY).
Reasons for performance
All top sectors invested in by the MJFOX fired in 2015. More importantly, its stock picks contributed enough to ward off negative contributions from entire sectors like materials and telecom services, or individual stocks from sectors. For 2015, the fund showed that a comparatively higher rate of portfolio turnover was not bad, as it delivered on the returns front.
In the next article, let’s take a look at the T. Rowe Price Japan Fund (PRJPX).