Quantitative Metrics Don’t Favor CAJAX



Columbia Asia Pacific ex-Japan Fund performance

In this article, we’ll outline the performance of the Columbia Asia Pacific ex-Japan Fund Class A (CAJAX), which is one of the classes available for retail investors. The fund is invested in the stocks of companies such as Tencent Holdings (TCEHY), Westpac Banking (WBK), Lenovo Group (LNVGF), Korea Electric Power (KEP), and CNOOC (CEO).

From a purely net asset value return standpoint, CAJAX had a hard time in both the one-year period until February 29, 2016, and in 2015. It stood second last in its peer group for both the aforementioned periods.[1. When we refer to the peer group, we mean the group of 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

CAJAX’s standard deviation, or its volatility of returns, in the one-year period until February 29 was 17.8%. This was marginally lower than AAXJ’s 17.9%, but it was much higher than 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.

CAJAX’s 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, CAJAX’s information ratio was zero.

A note to investors

The fund’s alpha was negative for both the one-year period ended February 29 and for 2015. Unlike a negative information ratio, we can evaluate a negative alpha. For both periods, CAJAX stood tenth among the 12 funds in this review. Year-to-date in 2016, the fund’s volatility remains high, and its alpha is the second worst among its peers. Given the poor quantitative metrics and high volatility of CAJAX’s returns, investors may want to look at other vehicles to help them invest in the region.

In the next article, we’ll look at the Fidelity Advisor Emerging Asia Fund Class A (FEAAX).


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