Returns of the Fidelity Pacific Basin Fund (FPBFX)
From a purely NAV (net asset value) return standpoint, FPBFX was the best-performing fund among the nine we’ll be looking at in this series. It stood at the top of the list in both calendar 2015 and the one-year period ending January 2016. In January 2016 alone, it came in third.
As a benchmark for all the funds in this review, we’ll look at the metrics of the MSCI AC Asia-Pacific Index. Although FPBFX is benchmarked to the MSCI AC Pacific Index, we’ll use the former, given the fund’s exposure to some geographies that do not form part of the latter index.
Standard deviation is used for assessing risks associated with an investment. Simply put, this metric measures the deviation of a series of returns from its average. A wide deviation reflects high fluctuation in returns, resulting in higher risk, and vice-versa.
For the one-year period ending January 2016, the standard deviation for FPBFX stood at 15.0%. The MSCI AC Asia Pacific Index had a standard deviation of 16.1% over the same period. Meanwhile, the arithmetic average of the standard deviation of all funds in this review was 15.3%. Hence, the returns of FPBFX were less volatile than both the average of its peer group and the index.
The Sharpe Ratio
For realized returns, the Sharpe Ratio assesses the average return of a risk-free asset or security (like US Treasuries of a certain maturity) over total risk, as represented by standard deviation. The higher the Sharpe Ratio, the better the fund’s risk-adjusted performance.
The Sharpe Ratio for FPBFX for the one-year period ending January 2016 stood at -0.05. This risk-adjusted measure stood at -0.62 for the index, showing a much better risk-adjusted performance by the fund.
The information ratio shows the consistency of a fund manager along with measuring his ability to generate excess returns over a benchmark. With the MSCI AC Asia-Pacific Index as its benchmark, the information ratio of FPBFX was 2.26 for the one-year period ending January 2016—the highest among all nine funds in this series.
Meanwhile, the beta of the fund stood at 0.89, making it a little less volatile than the index used in this analysis.
A note for investors
FPBFX is invested in Japan Tobacco (JAPAY), SoftBank Group (SFTBY), Lenovo Group (LNVGY), Cognizant Technology Solutions (CTSH), and China Biologic Products (CBPO), and it was the best performer over the past year. The fund’s Sharpe and information ratios have shown better risk-adjusted performance and the consistency of the fund manager to provide returns—both great quantitative indicators to have. A similar performance in the long-term can make this a compelling investment choice.
Let’s move now to our next Asia-Pacific fund: the Matthews Asia Dividend Fund Investor Class (MAPIX).