The Daily Screen: The Best Pacific/Asia Funds

And you thought Japan funds were the worst this year.

They're down 16.3% since Jan. 1, but that's peanuts compared with Pacific/Asia funds, the troubled fund dustbin the Daily Screen is picking through today, which are getting crushed to the tune of a 31% loss since Jan. 1. On average, they're down more than any other foreign or domestic fund category.

These funds tend to spread their money around Asia, including stocks in Japan, Korea, India, Hong Kong, China and Australia. Many of these markets have been a haven for tech and telecom companies, so they rode those sectors to a 93% average gain last year and fell with them this year.

This kind of mercurial performance is status quo for these funds. In the 1990s, the average Pacific/Asia fund lost money half the time, with the biggest tank coming in 1997 when the category lost 27.9%, on average.

Pacific Blues Any way you slice it, it's been hard times for Pacific/Asia funds.
	Avg. Pacific/Asia Fund	S&P 500
YTD	-31%	-4.8%
1-Year	-6.3	8.1
5-Year	-1	20.9
10-Year	7.1	18.9
Source: Morningstar. Annualized performance figures through Oct. 24.

But, before you laugh at the poor folks who got in this year and skip the rest of the story, consider this: This year's dog is often next year's hero. Need proof? Check out this article from late last year.

If you really want to focus on developing or emerging markets, an emerging markets fund might make more sense since it gives you access to similar opportunities but tends to offer greater geographic diversification (translation: lower volatility).

But if you want a fund that focuses on developing Asian markets and Japan, and you're willing to take on white-knuckle risk with a modest part of your portfolio, here's a look at some funds you might consider. Eight funds have beaten their average peer over the last one- and three-year periods, according to Morningstar.

Best of the . . . Among Pacific/Asia funds that topped their peers over the past one- and three-year periods, these have the highest one- year returns.
Pacific/Asia fund	1-Year Return	3-Year Return
(MAPCX)Merrill Lynch Pacific	3.2	11.6
(JHWPX)Hancock Pacific Basin Equities	2.6	6.2
(FNPEX)59 Wall St. Pacific Basin	2.4	17.3
(GAPCX)GAM Pacific Basin	1.4	2.9
(AALAX)Alliance All-Asia Investment	-0.8	7.7
(FPBFX)Fidelity Pacific Basin	-0.9	16.3
(TGRAX)MSDW Pacific Growth	-3	1.9
(SAAFX)Schroder All- Asia	-4.6	2
Avg. Pacific/Asia fund	-6.3	-1.7
S&P 500	7.2	15
Source: Morningstar. Annualized performance figures through Oct. 23

Two funds on the list that might jump out at you are Merrill Lynch Pacific and Fidelity Pacific Basin. Both have consistently beaten their peers over the past one-, three-, five- and 10-year periods.

On the broker-sold Merrill fund, Stephen Silverman has held the reins since 1983, a fairly stunning tenure in this day. He tends to focus on big-caps and had about half the fund's assets in Japanese stocks, as of June 30, the fund's most recent portfolio report.

William Kennedy has run the Fidelity Pacific Basin fund only since the start of last year, but the firm's vast bench of analysts should probably be credited with this fund's success. This fund also tends to focus on big-cap and blue-chip stocks with a big Japan weighting, but it puts more emphasis on tech stocks than the Merrill fund.

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