Jack,
Funds based on foreign markets have two main risks; market risk present in all countries and currency risk, a factor you can ignore with a domestic fund. Some, but not all, fund managers avoid currency risk by hedging.
With a Japanese fund, that would mean trying to neutralize dollar-yen fluctuations through futures. Obviously, the cost of these futures detracts slightly from fund performance, but avoids downdrafts caused by large currency changes. Such fund managers feel that the relatively low cost of hedging currency more than offsets the pain and cost of suffering significant currency fluctuations.
Other funds don't hedge. They simply hang in there and take their currency lumps. When a local index, such as the Nikkei moves up, but currency fluctuations move contra, your fund's NAV won't move up as much as the local index and could even move down in the face of a large opposing currency change.
On the other hand, none of this may matter with respect to the fund you own; that is, there could be yet another factor at work. However, it would probably be worth your time to check on what your fund does or doesn't do with respect to currency risk. In addition, you can check on currency swings on the days you notice the puzzling moves you wrote about to see if that explains the seemingly contradictory moves.
Hope that helps.
Saul... |
