Tom Lydon, the guy who you see all over the place, on the web, at speaking engagements, today posted an interesting observation on his LinkedIn page. To wit:
WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) has been getting a lot of press lately with the ETF’s currency-hedged strategy is in the sweet spot as Japanese stocks rally and the yen plumbs multiyear lows. However, DXJ was falling harder than unhedged ETFs on Friday morning as the yen...
My question to him was (haven't heard back yet from Tom): Is this a buy-and-hold investment or a short-term trade? We all know what kind of shape Japan is in economically speaking (deflation, aging population . . .); who out there is actually bullish on Japan and putting client money in Asian funds (including Japan) or even Japanese-focused funds and ETFs? Here is an article that we published on investing in Asia.
Stan Luxenberg, our long-time mutual fund correspondent, had this to say recently about Japan (in an article on should you invest passively in overseas funds/ETFs or go active?):
Part of the reason that investors have embraced the passive international approach may be connected to the success of S&P 500 index funds. For decades, Vanguard S&P 500 (VFINX) has delivered consistent returns, finishing in the top half of the domestic equity category during most years. Influenced by those results, investors figure that foreign index funds will also be winners. But the MSCI EAFE has proven to be a much easier benchmark for active managers to beat. The EAFE index has 22 percent of its assets in sluggish Japan and almost none in the high-growth emerging markets. So active managers have topped the benchmark by underweighting Tokyo and picking the right emerging markets. [emphasis added]
Make no mistake, Japan could rally this year, helping EAFE to beat active managers. But Japan remains burdened by enormous debts and the costs of supporting an aging population. So odds are good that active managers will top the benchmark.
Anybody out there bullish on Japan? And if so, which funds/ETFs do you use to play a Japanese recovery? And should one go passive or active? Lemme know!