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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

THE FEELING IS MUTUAL

Tips on how to choose the best unit trust


Go to the Top 100 Emerging Markets chart

WHEN ROLAND HAAS WAS featured in our March 21 MONEY & INVESTING section, we described his Lippo Indonesian Growth Fund as "among the best performers in the region." A new ranking for Asiaweek by mutual-funds tracker Micropal has confirmed the $50-million unit trust's pre-eminence -- and more. Lippo took the No. 1 spot among all of Asia's emerging-markets equity funds. Its price-per-share over three years has grown more than 127% as of March 7. No other Indonesian fund made it to the top 100 unit trusts.

But don't rush to buy Lippo. Do your homework first. "Performance statistics do not guarantee future performance," warns David O'Dwyer, general manager of Micropal Asia in Hong Kong. "People should talk to professional investment managers who can advise about investment goals and walk clients through the financial planning process." It may be that the total return of a hot winner was skewed by a one-time lucky break that pulled up the average. It is also possible that the booming stock market the fund is riding has peaked -- and may be heading for a fall.

Micropal compiled data on the top 100 of the 295 Hong Kong and Singapore-authorized equities funds that invest in Asia (excluding Japan), Latin America and eastern Europe. You will find in the following table their three-year, one-year and three-month returns. Micropal also analyzed the relative risk of each unit trust. "We look at the average monthly performance over three years relative to the sector average for the same period and divide the number by the standard deviations of those relative returns," says O'Dwyer. "You come up with a figure that indicates whether a fund is performing consistently well against the average for its sector."

So study the Micropal Star Ratings. "Five stars indicate that a fund is performing consistently well relative to its peer group," says O'Dwyer. "A fund that performs strongly in terms of total return but behaves differently from its peer group indicates volatility and will not win five stars." The fewer the stars, the more volatile the fund is likely to be, though it can also mean that the fund is under-performing. Is this why the Lippo Indonesian Growth Fund rates only four stars? Not really. That's the highest rating for the sector because "there are not enough funds to compare against," says O'Dwyer. This is also true of sectors like Taiwan, the Philippines and Latin America.

How important are fund managers? "They make the decisions," says O'Dwyer. "But if someone like Roland Haas goes off and joins some other company, that does not necessarily mean that he will have the same success. Certain fund companies have guidelines about how a manager should manage." HSBC, for example, is known for its fairly conservative investing style while JF is seen as more aggressive.

What else should you keep in mind? "Don't do short-term trading in and out of mutual funds because of the charges involved," advises O'Dwyer. "You should hold on to the fund for a long time." And learn when to plunk down your cash: "Investors tend to buy into funds at the wrong time. They look at the booming U.S. market and say, 'Wow, let me get in there.' But maybe it's too late. In the next few months, they should possibly be looking at markets like Thailand and Korea, which have gone down 40% or so." As they say in the trade, today's roosters could become tomorrow's feather dusters. But if you get your timing right, the plucked plumage may help you clean up.

-- By Cesar Bacani


This edition's table of contents | Asiaweek home

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