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Mutual Fund News

Sun barely shining on Japanese funds

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

How Japanese stock funds have fared, given a moribund market for nearly two decades.

Given recent developments, investing in Japan may seem intriguing. The Democratic Party last month broke the Liberal Democratic Party's 50-year lock on power. While the new government can't perform miracles, it promised to put more money into the pockets of consumers to boost domestic demand.

The benchmark Nikkei 225, meanwhile, has also rallied this year to just over 10,000 points from its low just below 7,000 last October. It's still a far cry, however, from its 1989 peak at nearly 39,000 points.

TODAY'S SEARCH

We asked Victor Tan, fund analyst at Globe Investor, to find all the Japanese equity funds available to Canadian investors over the past decade. We checked out the returns of the survivors since inception, and their annual returns in recent years. U.S. dollar and duplicate versions of the funds were excluded.

WHAT DID WE FIND?

Plenty of red ink among most survivors.

Half of the funds available over the past decade have closed or merged with others. Only two survivors have positive returns from inception.

AGF Japan Class has posted an average annual return of 8.8 per cent to Aug. 31 since it was launched in 1970. Its returns include the boom years in the Japanese market. (Its AGF Aggressive Japan Class and AGF RSP Japan have merged into this fund.)

Investors Japanese Equity-C has garnered an average annual return of 5.4 per cent from its inception in 1971.

In a recent commentary after the second quarter, Stephen Way, manager of AGF Japan Class, said the Japanese stock market has been climbing amid speculation that government spending will revive the domestic economy.

"Despite heightened expectations for an economic recovery, prospects for profits, capital spending and domestic consumption remain lacklustre," he said. Still, he's been able to find stocks with compelling valuations.

Despite the depressing long-term returns for most funds, it doesn't mean investors haven't been able to make any money.

Japanese equity funds were in positive territory from 2003 to 2005, and a few are up for the first eight months of 2009.

Claymore Japan Fundamental Index exchange-traded fund is the leader this year with an 8.9-per-cent gain; Fidelity Japan-A, 8.2 per cent; Mackenzie Focus Japan Class, 6.4 per cent; and BMO Japanese, 0.6 per cent.

If you plan to invest in the land of the rising sun, history indicates it pays to think short term.

How Japanese equity funds have fared
Aug.31
Inception ($-mil)LatestAug 31Calendar Year % Returns
Fund nameDateAssets MER% YTD2008200720062005200420032002Incpt
Claymore Japan Indx ETF C$ Hedged2/14/200722.08.9-46.7-23.7
Fidelity Japan-A7/5/19937.42.648.2-24.1-21.4-0.822.90.118.5-13.0-1.5
Mackenzie Focus Japan Class10/26/200018.02.506.4-22.7-20.5-6.332.73.125.6-6.8-3.8
BMO Japanese10/3/199411.92.480.6-15.6-25.31.619.73.714.3-13.3-5.6
AGF Japan Class11/30/197030.92.97-1.5-21.0-23.02.417.06.513.5-16.58.8
TD Japanese Growth11/23/199427.22.68-1.6-10.2-24.9-2.230.84.820.2-8.1-3.3
Investors Japanese Equity-C5/24/1971283.42.87-2.0-21.4-21.41.016.97.9-0.6-13.25.4
Manulife Japan Opportunities Class10/29/20024.82.90-3.3-13.0-26.6-0.223.86.012.4-1.2
Altamira Japanese Opportunity7/27/19948.02.40-3.9-12.4-17.55.713.15.922.9-10.4-1.4
BMO GDN Japanese Eqty Mutual9/25/20002.02.75-3.9-14.2-25.0-2.48.58.621.4-11.8-5.6
TD Japanese Index4/30/199821.80.98-4.4-10.2-19.94.620.96.19.7-11.6-1.9
CI Japanese Corporate Class12/23/19986.82.57-4.8-9.2-18.31.319.65.414.2-12.9-1.2
Frk Japan CC6/18/20016.52.72-14.4-22.0-21.9-7.139.25.011.3-11.7-6.6
AGF Aggressive Japan Class4/27/20002.72-29.0-12.228.111.431.4-24.6
AGF RSP Japan7/29/19993.383.011.4-17.4
Altamira RSP Japanese Opportunity1/11/20003.07-11.3
BMO RSP Japanese1/17/20003.03-13.6
CI Japanese RSP2/28/20002.665.113.8-13.0
CIBC Japanese Equity8/21/19952.86-25.0-2.925.40.915.7-14.9
CIBC Japanese Index RRSP9/16/19991.04-21.55.216.63.212.2-11.3
Clarica RSP Japanese Index1/1/20012.48-12.8
Fidelity RSP Japan-A1/31/20002.95-0.218.4-13.3
ING Japan Equity12/31/20002.922.52.4-13.5
Investors Japanese Equity RSP-C9/17/19993.137.5-0.8-14.0
Mackenzie Sel Mgr RSP Japan1/16/20013.34-6.9
McDonald New Japan10/18/19953.12
Montrusco Select Japan Equity8/31/1999
StrategicNova Japan9/7/19992.95
Trans GS Japanese 225 Index10/1/19965.267.5-16.6
NIKKEI 225 Total Return Index ($ Cdn)3.0-10.8-19.65.518.74.312.7-11.1
MSCI World ($ Cdn)8.1-26.1-7.120.66.67.39.4-20.2
S&P/TSX Composite Index20.9-35.07.214.521.912.524.3-14.0
Data not available for some funds because they have been terminated or merged with other funds
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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