Challenging times for international mutual funds
Navigating 2016 so far has been a challenge for international funds (ACWI) (VT), especially mutual funds, as they are bottom-up stock pickers. It was not like this from the beginning of the year. The world of investing entered 2016 with a lot of hope, especially regarding normalization of monetary policy in the US. However, for the most part, non-US factors have given direction to monetary policy, including in the US (VTI) (USMV).
China had spooked global financial markets earlier in the year. Then US economic growth and job additions at different points of time gave rise to some concern as well. But the event of the year so far has been Brexit. The UK’s vote to leave has put several central banks on the defensive, in addition to getting British banks like Barclays (BCS), the Royal Bank of Scotland Group (RBS), and Lloyds Banking Group (LYG) worried. For a while, it seemed that the US Federal Reserve could defer its plans to raise rates to beyond 2016. But the July 2016 meeting minutes show that Brexit may not be as bad for the US as had been feared earlier.
In this series
The graph above shows point-to-point returns of 12 international mutual funds we’ll be reviewing in this series. Most of these are ex-US or have a very limited exposure to US securities, though there are a few exceptions (UNCGX) (IVINX).
We’ll look in depth into the portfolios of these funds individually and conduct attribution analysis to see which sector and stock picks helped or hurt a fund. Apart from mutual funds, we have graphed the performance of the iShares MSCI ACWI ex U.S. ETF (ACWX) and the iShares MSCI EAFE ETF (EFA) to provide you with a passive fund comparison.
Let’s begin our review with the AB International Growth Fund – Class A (AWPAX).