Thesis
JPIN invests in international equities in developed markets. We expect JPIN to add value over the benchmark (MSCI EAFE) by two ways: 1) enhanced returns through a multi-factor security selection approach combining value, quality, and momentum factors; 2) enhanced risk control through more balanced country and sector allocations. We expect attractive risk-adjusted return characteristics over the long term from JPIN.
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Overview
Year to date, JPIN has underperformed the benchmark (MSCI EAFE) by 6.37%, largely due to poor stock selection in Japan and overweight country selection in South Korea. While both heavily weighted on underperformance, JPIN showed promise through successful stock selection and allocation in the UK, Finland, and Spain.
YTD Summary
- JPIN has returned 13.91%, while the MSCI EAFE has returned 18.15%
- South Korea and Japan attributed to 92.5% of the underperformance to our benchmark
o South Korea attributed to over 56% of this relatively worse performance (Note: South Korea is not included in the MSCI EAFE index) - When comparing to the FTSE index (which includes South Korea), JPIN underperformed by 3.39% YTD
o FTSE returned 17.31%
o South Korea and Japan attributed to almost 83% of this underperformance, where both countries detracted by about the same amount
Optimistic Outlook - We continue to hold this fund and believe in our thesis due to the fund’s multi-factor approach, which we see bringing relatively positive returns over the long-run
- The largest detractor was the overweighting in South Korea, which has underperformed year to date; historically, South Korea has been a strong performer
- JPIN’s strategy has stayed consistent through tough times producing strong risk-adjusted returns
- Besides Japan’s poor stock selection this year, overall stock selection has been a positive for JPIN historically, and we believe will continue to do so
[Category Mutual Fund Commentary]
