Is Hennessy Japan Small Cap Fund Investor (HJPSX) A Strong Mutual Fund Pick Right Now?

There are plenty of choices in the Pacific Rim - Equity category, but where should you start your research? Well, one fund that might be worth investigating is Hennessy Japan Small Cap Fund Investor (HJPSX). HJPSX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Pacific Rim - Equity funds is an area filled with options, such as HJPSX. Pacific Rim - Equity mutual funds usually invest in companies with a big presence in the export-focused markets of Hong Kong, Singapore, Taiwan, and Korea. These funds also invest less than 10% of their assets in Japanese companies since Japan mutual funds are incredibly popular.

History of Fund/Manager

Hennessy is based in Novato, CA, and is the manager of HJPSX. The Hennessy Japan Small Cap Fund Investor made its debut in August of 2007 and HJPSX has managed to accumulate roughly $114.13 million in assets, as of the most recently available information. Tadahiro Fujimura is the fund's current manager and has held that role since August of 2007.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 16.07%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 20.65%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, HJPSX's standard deviation comes in at 9.83%, compared to the category average of 11.39%. Over the past 5 years, the standard deviation of the fund is 9.55% compared to the category average of 11.01%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In the most recent bear market, HJPSX lost 42.04% and underperformed its peer group by 16.14%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. HJPSX has a 5-year beta of 0.39, which means it is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. HJPSX has generated a positive alpha over the past five years of 10.28, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, HJPSX is a no load fund. It has an expense ratio of 1.44% compared to the category average of 1.46%. From a cost perspective, HJPSX is actually cheaper than its peers.

While the minimum initial investment for the product is $2,500, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Hennessy Japan Small Cap Fund Investor ( HJPSX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on HJPSXin the Pacific Rim - Equity category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.