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Sam Subramanian

JAOSX – A Worthy International Mutual Fund?
Review of Investment Strategy, Fund Performance, Expense, and More ...

Sam Subramanian PhD, MBA

With emerging economies forecasted to grow at a 6.2% annual rate over the next couple of years compared to a 2.6% annual clip for the U. S. economy, increasing number of mutual fund investors are venturing overseas in pursuit of profit opportunities.

International mutual funds like American Funds Capital World (RWIGX), Fidelity Diversified International Fund (FDIVX), Harbor International Fund (HIINX), and Vanguard International Growth Fund (VWIGX) have been adept at gathering assets to emerge as titans.

Meanwhile, Janus Overseas Fund (JAOSX) has accumulated an enviable 5-year track record that trounces the titans.

So, what investment strategy does JAOSX use to lead the pack? Should you invest in JAOSX? For insights to help you make an informed decision, read on ...

JAOSX Investment Strategy

Even though JAOSX is often classified as an international mutual fund, the fund literally seeks opportunities worldwide. Brent Lynn, managing the fund solely since 2001, follows a 'go-anywhere' investing strategy.

While the fund invests a significant portion of its assets in shares of companies in developed foreign markets, the portfolio manager can invest meaningful portions of the assets in the U. S. as well as emerging markets. The fund may also invest in foreign debt securities.

Brent Lynn uses a 'bottom up' approach to make what he calls high conviction, long-term investments in world-class companies with exciting growth prospects trading at undeservedly low valuations.

JAOSX Nuts & Bolts: Fund Performance, Risk, Expense, and Tax Efficiency

The willingness to venture beyond developed foreign markets and invest in economies and firms with higher growth prospects has worked to Janus Overseas’ advantage while elevating volatility.

Comparison of JAOSX with international mutual fund
JAOSX peer group consists of international large-cap growth mutual funds including AIM International Growth (AIIEX), AllianceBernstein International Growth (AWPYX), American Century International Growth (TWGAX), Artisan International (ARTIX), Fidelity Diversified International (FDIVX), Laudus International MarketMasters (SWOIX), MFS International Growth (MGRAX), Oppenheimer International Growth (OIGAX), T. Rowe Price International Stock (PRITX) and William Blair International Growth (BIGIX).

JAOSX has outperformed most of its peers over long periods ranking in the top 3 and 8 percentiles of foreign large-cap growth funds over the 5-year and 10-year timeframes. The fund proves to be nearly 25% more volatile than its peer group of international large cap growth mutual funds. JAOSX also has a tendency to lag its peers in down markets as illustrated by its bottom 20 percentile finish during the bear markets of both 2002 and 2008.

From an expense perspective, JAOSX ratio compares favorably with the average international mutual fund.

Past performance shows JAOSX to be superior to the average foreign large cap growth peer from a tax efficiency perspective. On average, Janus Overseas investors have paid 0.74% of their assets as taxes over the past 5-years. However, prospective new investors in JAOSX should note that JAOSX has capital gains exposure. As such, investors are liable to incur capital gains taxes on profits previously earned by the fund.

Using JAOSX as an International Mutual Fund

Most investors are likely to find JAOSX too volatile to be a core foreign stock fund. Risk-tolerant investors with a long time horizon can probably tolerate this volatility. The fund can however serve as a solid satellite fund for gaining exposure to the more venturesome parts of international markets. Investment style rotators will also find JAOSX a worthy selection when they seek exposure to foreign large cap growth stocks in their portfolios.

Related articles:
YACKX, A Worthy Domestic Mutual Fund
Small Cap Value - Learn 4 Sound Small Cap Value Investments

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