Performance evaluation of CNJFX
The Commonwealth Japan Fund (CNJFX) fell 2.1% in the first four months of 2016, placing it in the middle of the pack of the nine funds in this review. In the past one year, the fund has again fallen 2.1%, ranking it fifth again among its peers. From the end of December 2015 until May 10, 2016, the fund has fallen 0.6%. 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 this average performance by the fund in the first trimester of 2016.
Portfolio composition and contribution to returns
Financials were the biggest negative contributors to CNJFX’s total returns in the first four months of 2016. Dai-ichi Life Insurance contributed the lion’s share of negative contributions from the sector. Mizuho Financial Group (MFG) was also a sizable negative contributor. Investing in the Fukuoka REIT was helpful to the fund, as it helped reduce some of the drag from the sector.
Stock picks from the healthcare sector almost exactly matched the quantum of contribution from financials. The difference was that their contribution was positive. Terumo and Asahi Intecc were winners in the sector, but Hoya dragged healthcare’s contribution a bit.
Stocks chosen from the consumer staples sector also did very well in the first trimester of 2016. Coca-Cola West led positive contributors from the sector.
Although CNJFX’s point-to-point returns for 2016 until April were negative, its total returns were positive. This helped it outperform the passively managed EWJ. Healthcare stocks came to the actively managed fund’s rescue by wiping out negative contributions from financials. CNJFX’s stock picks from both the healthcare and financial sectors did far better than those comprising EWJ. Takeda Pharmaceutical (TKPYY) and Astellas Pharma (ALPMY) dragged on EWJ, while CNJFX wasn’t invested in them. Meanwhile, stocks for Nomura Holdings (NMR), Sumitomo Mitsui Financial Group (SMFG), and Mitsubishi UFJ Financial Group (MTU) from the financials sector hurt EWJ.
The standout feature of the fund is its stock choices and low level of portfolio turnover. However, its performance is still average. It may not be the first choice for investors when choosing to invest in Japanese equities.
In the next article, let’s look at the Fidelity Japan Fund (FJPNX).