Why Nothing Is Right for APJAX


Mar. 7 2016, Published 4:55 p.m. ET

Aberdeen Asia-Pacific (ex-Japan) Equity Fund performance

In this article, we’ll outline the performance of the Aberdeen Asia-Pacific (ex-Japan) Equity Fund Class A (APJAX), one of the classes available for retail investors. The fund is invested in stocks of companies such as Rio Tinto (RIO), HSBC Holdings (HSBC), BHP Billiton (BHP), PetroChina (PTR), and British American Tobacco (BTI).

From a purely net asset value return standpoint, APJAX was the worst performer for both the one-year period until February 29, 2016, and for 2015 in the peer group chosen for this series. When we refer to the peer group, we mean the 12 funds chosen for this review. For return comparison, we’ve chosen two ETFs: the iShares MSCI All Country Asia ex Japan ETF (AAXJ) and the WisdomTree Asia Pacific ex-Japan ETF (AXJL).

For evaluating benchmark-related metrics, we’ve chosen AAXJ as the benchmark for all funds in this review, as it tracks the MSCI All Country Asia ex Japan Index.

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Other metrics

APJAX’s standard deviation, or its volatility of returns, in the one-year period until February 29 was 16.2%. This was lower than both AAXJ’s 17.9% and the peer group’s average of 16.5%.

The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for both the one-year period ended February 29 and for 2015. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that.

The information ratio, calculated with AAXJ as the benchmark, was negative for the one-year period ended February 29, making it one of only three funds in this review with a negative ratio. The information ratio shows the consistency of a fund manager and measures his ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. We can’t evaluate a negative information ratio, though. For 2015, the fund’s information ratio was also negative.

A note to investors

Apart from the information ratio, the fund’s alpha was also negative for both the one-year period ended February 29 and for 2015. Unlike a negative information ratio, we can evaluate a negative alpha. The negative values for both the aforementioned periods placed APJAX last among the 12 funds in this review.

Year-to-date in 2016, the fund has posted a positive information ratio, but this alone may not instill enough confidence in its ability to generate consistent performance. Investors should evaluate other funds in this review before making a decision.

In the next article, we’ll look at the Invesco Asia Pacific Growth Fund Class A (ASIAX).


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