Performance evaluation of MJFOX
The Matthews Japan Fund – Investor Class (MJFOX) rose 0.3% in the first four months of 2016, placing it third among the nine funds in this review. In the past one year, the fund has risen 2.5%, which ranked it as the second best among its peers. From the end of December 2015 until May 10, 2016, the fund has risen 3.8%. Below, we’ve graphed its performance against two ETFs: the iShares MSCI Japan ETF (EWJ) and the iShares Currency Hedged MSCI Japan ETF (HEWJ).
Let’s look at what has contributed to the fund’s superior performance in the first trimester of 2016.
Portfolio composition and contribution to returns
The healthcare sector contributed the most to MJFOX’s small rise in the first four months of 2016. Staying invested in M3 proved beneficial since the stock contributed the lion’s share of the sector’s total positive contribution to the fund. However, the full impact of positive contributors was reduced to some extent by a negative contribution from Rohto Pharmaceutical.
Fund managers’ astute picks from the financial sector meant the sector contributed positively to the fund’s returns. Financials have tormented nearly all active funds, but not MJFOX. Choosing Financial Products Group over more traditional stock choices from the sector proved to be a boon. The stock did great for the fund in the first trimester of 2016. Nihon M&A Center played a similar role. Meanwhile, more traditional choices such as Sumitomo Mitsui Financial Group (SMFG) and Tokio Marine Holdings (TKOMY) dragged on the sector’s returns.
MJFOX has emerged among the top three funds in terms of point-to-point returns for most periods except April, which was a bad month for the fund. It has easily beaten passively managed EWJ. Except for the information technology sector, its stock picks from all other sectors did better than those comprising EWJ.
Fund managers have shown the ability to make smart stock picks, which is an important skill for an active fund manager. For investors looking to invest for the medium to long term, MJFOX might be on the shortlist of funds investing in Japan.
In the next article, we’ll take a look at the Nuveen Tradewinds Japan Fund – Class A (NTJAX).