Core Viewpoint - The WisdomTree Japan Hedged Equity Fund (DXJ) effectively mitigates currency risk for U.S. investors, allowing them to benefit from Japanese equity returns without the adverse effects of yen fluctuations, achieving a 34% return in 2024 compared to 16% for the S&P 500 [1][3]. Group 1: Fund Performance - DXJ returned 34% in 2024, outperforming the S&P 500's 16% return [3]. - The fund's currency hedging contributed over 7 percentage points of outperformance compared to unhedged Japanese equities in 2024 [4]. - The unhedged alternative, iShares MSCI Japan ETF (EWJ), returned 27% during the same period, highlighting the impact of currency movements on returns [4]. Group 2: Fund Composition and Strategy - DXJ holds 430 Japanese companies that pay dividends and derive at least 20% of their revenue from outside Japan, including major exporters like Toyota, Mitsubishi UFJ Financial, and Sumitomo Mitsui Financial [2]. - The fund employs forward currency contracts to neutralize yen-dollar fluctuations, enabling investors to capture Japanese equity returns without currency headwinds [2]. Group 3: Income and Expenses - DXJ offers a yield of 3.1%, providing modest income alongside potential capital appreciation, although dividend distributions can be volatile due to underlying equity dividends and hedging gains or losses [5]. - The fund charges a 0.48% expense ratio, which is reasonable for an actively hedged strategy but higher than that of broad market index funds [6]. - With $4.8 billion in assets, DXJ provides sufficient liquidity and trades at approximately 16 times earnings, which is attractive compared to U.S. large caps [6]. Group 4: Risks and Trade-offs - Currency hedging can be a double-edged sword; when the yen strengthens, unhedged investors benefit from favorable currency translation, while DXJ holders miss out, leading to potential underperformance of DXJ compared to EWJ [7]. - Investors are essentially betting that the yen will remain weak or that Japanese equities will rise sufficiently to offset any currency-related losses [7].

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]