Dallas, Texas 01/30/2014 (FINANCIALSTRENDS) – WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) has given record breaking performance, the equity fund has posted returns of almost 30%, higher than the benchmark EWJ (iShares-MSCI Japan Index). In fact many hedge funds, large investors and even banks have made good returns by riding on Japan’s growth.
The Rising Sun:
WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) not only has seen better results, it has seen its assets under management increase to nearly $8 billion and that too with an expense ratio of just 0.48%. Many investors; retail or institutional have made money by shrting the Yen and going long on Japanese stocks. Ordinary investors, who do not have the time or the resources, have managed to ride this wave by investing in ETF such as WisdomTree. WisdomTree has a very clear cut strategy; it “provides exposure to equity securities in Japan, while at the same time hedging exposure to fluctuations between the value of the U.S. dollar and the Japanese yen.” They limit their exposure in any company to only 5% and also seek to limit exposure to any sector to 25%. They also invest in a basket of Japanese stocks and diversify their holdings. To offset any currency fluctuations, they hedge their exposure to the yen through future contracts.
Japan On A Roll:
Though the trade deficit has widened, the economy and the share market is on a roll. The Japanese markets had their best year since the bubble burst of 1990. The steps taken by the Prime Minister have ensured that Japan has not been hit hard as other economies. And ETFs like WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) have reaped the benefits. They have had to steer through a minefield but their results show the management wisdom.
There are still some lingering issues; the trade deficit is quite worrisome. The Fukushima Nuclear meltdown in 2011 saw the country shutdown all its nuclear power plants. The deficit in power had to be made up by costly power imports. The weak yen also contributed to the trade deficit doubling to nearly $113 billion. How the country deals with these issues remains to be seen. The performance of WisdomTree will also rest on the solution to these issues.