DXJ invests only in Japan, and since it hedges against the exposure to the yen, it may enable you to more fully participate in equity returns.
DXJ enables investors to complement or replace index funds tracking the MSCI Japan Index with an index that offers similar exposure to Japan but without exposure to the yen.
MSCI Japan Index: A free-float adjusted market capitalization-weighted index designed to track the equity market performance of Japanese securities listed on the Tokyo Stock Exchange, Osaka Stock Exchange, JASDAQ and Nagoya Stock Exchange.
Take the yen out of Japan
Read the Case for DXJ »
You drive their cars and use their technology. In fact, many leading Japanese companies—and brands you know—derive the majority of their sales from outside Japan. Moreover, a decline in the yen has historically spurred demand for Japanese products—and may drive equity performance higher.
Below are the top 10 holdings in the WisdomTree Japan Hedged Equity Fund (DXJ), their current weights and the amount of revenue they generate globally and domestically.
Source: WisdomTree. Holdings subject to change.
As U.S. markets surpass record highs, the Nikkei 225 Index must rise over 47% to reach July 2007 highs. Additionally, even with recent depreciation, the yen is still 30% stronger than it was at the same point in time.1
Japanese equities shown through the Nikkei 225 Index. Period is from 3/31/2003 to 3/31/2013.
Past performance is not indicative of future results. You cannot invest directly in an index.
1Source: Bloomberg. Refers to the 7/9/2007 value of the Nikkei 225 Index as well as the value of the yen in terms of U.S. dollars as of the same date.
When investing in Japan, U.S. investors are potentially making two separate investments: One in the yen’s performance against the U.S. dollar and one in the actual Japanese equities. Historically, Japanese equities1 have exhibited a negative correlation2 to the performance of the yen, which means that, by and large, as stock prices have risen, the yen has tended toward depreciation relative to the U.S. dollar (and vice versa). While the yen has certainly been known as a bastion of currency strength in recent years, a sustained trend of depreciation began in November of 2012 and has continued through the end of the first quarter of 2013. WisdomTree’s approach to Japanese equities3 has mitigated the impact of this currency move, capturing the performance of the Japan’s local equity market which has done quite well.
Source: Bloomberg, WisdomTree
The trailing one-year period from 3/31/2012 to 3/31/2013 was selected to indicate the relationship between the cumulative performance (be it positive or negative) of the yen spot rate (vs. USD)* and two Indexes** of Japanese equity performance.
Past performance is not indicative of future results. You cannot invest directly in an index. Index performance does not represent actual fund or portfolio performance. A fund or portfolio may differ significantly from the securities included in the index. Index performance assumes reinvestment of dividends but does not reflect any management fees, transaction costs or other expenses that would be incurred by a portfolio or fund, or brokerage commissions on transactions in fund shares. Such fees, expenses and commissions could reduce returns.
*Yen spot rate (vs. USD): Indicates the change in value of the yen in terms of U.S. dollars. Negative values indicate the yen has lost value relative to the U.S. dollar.
**The WisdomTree Japan Hedged Equity Index and MSCI Japan Index were selected to contrast the difference in cumulative performance between an index that hedges any fluctuations in the value of the yen vs. the U.S. dollar and an index that includes those fluctuations within its performance calculations.
Source: Bloomberg, WisdomTree
Past performance does not guarantee future results. You cannot invest directly in an index.
1The MSCI Japan Local Currency Index.
2Correlation: A statistical measure of how an index moves in relation to another index or model portfolio.
3The WisdomTree Japan Hedged Equity Index.
The WisdomTree Japan Hedged Equity Index, which DXJ is designed to track, uses a rules-based process for selecting and weighting securities while managing the yen risk.
Universe composed of the largest dividend-paying companies from WisdomTree’s Japan Dividend Index that are traded in yen, with a minimum market capitalization of $100 million and with no more than 80% of their revenue generated from inside Japan.
Local Market Japan Equity Return
Hedged Equity Return
The Fund will implement the currency hedging strategy by entering into one-month forward2 contracts each month and rebalancing at month-end.
1These caps are as of the annual Index rebalance. In response to market conditions, security and sector weights may fluctuate above the specific cap between the annual Index rebalance dates.
2One-month forward currency contract: An agreement between two parties to exchange two currencies at a given exchange rate thirty days in the future. This guarantees an exchange rate on a given date.