Telecom Services Cap the High Portfolio Turnover for SAESX

Performance evaluation of SAESX

The SunAmerica Japan Fund – Class A (SAESX) fell a sharp 17% in the first four months of 2016, making it the second-worst performer among the nine funds in this review. In the past one year, the fund has fallen 20.7%, again ranking second-to-last among its peers. From the end of December 2015 until May 10, 2016, the fund has fallen 11.4%. 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 poor performance in the first trimester of 2016.

Telecom Services Cap the High Portfolio Turnover for SAESX

Portfolio composition and contribution to returns

The financials sector was the key negative contributor to SAESX’s returns in the first four months of 2016. Sony Financial Holdings drove down returns from the sector. Mitsubishi UFJ Financial Group (MTU) and Mizuho Financial Group (MFG) followed closely. Leopalace 21 contributed positively but was not able to do much good.

Toyota Industries drove down the consumer discretionary sector. Detractors from the sector included Nissan Motor (NSANY) and Toyo Tire & Rubber, among others.

Telecom services played a key role in saving the fund. Its sizable positive contribution ensured that the fund’s negative returns were capped to a certain extent. SoftBank Group (SFTBY), Nippon Telegraph & Telephone (NTT), and KDDI all contributed positively.

Investor takeaways

SAESX was convincingly beaten by EWJ in the first trimester of 2016. Except for the materials and telecom services sectors, none of SAESX’s stock picks from the other sectors could outperform those of EWJ.

The fund’s high portfolio turnover is a liability since the high churn rate hasn’t resulted in superior performance. New investors may tend to stay away from the fund. Existing investors will have to wait and watch for their investments to recover a little.

In the final article of this series, we’ll look at the big picture that should be emerging regarding your Japanese equity investments.