After a very rough 2014, it looks like the fund’s contrarian, value focused style is starting to reward investors. To the end of May, it has gained 15.3%, outpacing the MSCI World Index.
Much of this outperformance can be attributed to the fund’s Japanese holdings. At March 31, it held nearly a third of the portfolio in Japan, and another 16% in other Asian names. They like Japan for a few reasons, the biggest of which being the decline in the Yen, which makes Japanese exporters extremely competitive. The portfolio holds many Japanese exporters including Panasonic, Toyota, and Yamaha Motor.
Japan is also starting to show signs of an economic recovery, which is a boost to many domestic focused names held in the portfolio, including East Japan Railway, Nippon Telegraph and Telephone, and Nomura Holdings.
European names have also had a strong run, thanks largely to the positive reception of the European Central Bank’s latest stimulus efforts. The fund has about 40% invested in Europe.
The portfolio metrics are quite favourable, with valuations well below the index. This should bode well for the longer term outlook.
While I’m encouraged by this turnaround, I’m still reluctant to recommend the fund. It continues to be more volatile than the index, and I still believe there are more attractive global equity options available.