Merrill Lynch Pacific D fund, clearly the best performing fund in this set, took shelter in Japan during the Asian storm. Its hiding place was so safe that it actually registered a positive return for the year ended February 28, 1998, the only diversified Pacific fund to achieve such a feat. Selecting Japanese blue chips gave the fund the highest median market capitalization of all the Pacific funds we evaluated. Though it had even more exposure to Japan than Merrill Lynch did, the Fidelity Pacific Basin fund did not fare as well. However, the fund should be recognized for its minimal loss, less than 7%, and its 3% front-end load, the lowest of our group.

A note here about loads: all of the funds listed here impose these sales charges, but the loads usually are reduced or eliminated for larger investments. Also, certain funds are available to clients of money managers at no load or at reduced charges. Palisades Hudson clients, for example, pay no loads on the GAM Pacific Basin fund.

The Putnam offering fared reasonably well during the turmoil. Its portfolio mostly consisted of blue chip companies, with Sony and Canon its two largest holdings. It has also finished in the top half of its Morningstar category in five of the last six years.

GAM Pacific Basin fund has the lowest price to cash flow ratio of all the funds we considered. The fund has made a huge bet on the stronger Asian banks as evidenced by its 42% stake in the financial sector. GAM has finished in the top half of the Pacific-Non Diversified category in eight out of the last ten years.

Prudential Pacific Growth’s recent manager change may have a material effect on the fund’s future results. The new manager, Steve Auth, prefers to select the best companies in the Pacific rather than each specific country’s best stocks. This approach led him to cut the fund’s prior 50% Japanese exposure to 36%. Also noteworthy is this fund’s sizable cash stake of 21%.

The final fund to clear our screen was the Templeton Pacific Growth I. It emphasizes smaller companies (reflected in its median market capitalization, the lowest of this group) and it holds a relatively small stake in Japan. On both these points, it deviated from our own selection bias. On the other hand, you might feel differently about the prospects of Japan vis-à-vis the rest of the region, or about the relative merits of smaller companies, so you might be interested.

If and when you begin your search for Pacific Rim funds, be cautious about comparing like funds. Morningstar categories include Diversified Emerging Markets, Diversified Pacific/Asia Stock, Pacific/Asia ex-Japan Stock and Japan Stock. Another avenue to consider is to add a combination of funds in different categories to your Pacific Rim portfolio. For instance, if you select a fund such as Templeton Pacific Growth I but still require more exposure to Japan, you could choose a Japan-only fund to reach the balance you want.