The Ivy European Opportunities Fund: Class A (IEOAX) fell 5.5% in August 2015 from a month ago—the least among the six mutual funds under this review. However, beyond this period, the fund’s performance has been less impressive.
In the three-month period ended August 31, the fund fell 7.0%. In the six-month period, it was down 4.1%. In the YTD (year-to-date) period, the fund was up by 3.4%—the third highest among its peers in this review. Let’s look at what has contributed to this performance by the fund.
Portfolio composition and contribution to returns
The IEOAX’s latest available complete portfolio is as of June 2015, so it’s a bit dated. However, the sectoral composition is available as of August 2015. According to its August portfolio, the top three sectors invested in by the fund were industrials, healthcare, and financials, with exposures of 18.5%, 15.8%, and 15.3%, respectively. The consumer discretionary sector followed these three core sectors, with an exposure of 11.6%.
According to the June portfolio, the top three standings were a bit different and were in the following order: financials, industrials, and healthcare. The security-level analysis that we’ll do next will be based on the June portfolio, which was composed of 83 stocks, as that is the latest available with complete holdings.
Financials and healthcare stocks did not fare well and were the top two negative contributors to returns. Financials were led down by ING Groep N.V. (ING), Barclays PLC (BCS), and Commerzbank AG. ING was also the top sectoral holding in terms of portfolio exposure. Meanwhile, among healthcare stocks, Shire plc (SHPG) led decliners, followed by Alexion Pharmaceuticals, Inc. (ALXN). Novartis AG (NVS) also contributed negatively to overall returns.
Industrials were led down by Prysmian S.p.A. What saved the fund from further underperformance was that even though industrials contributed negatively to returns, their contribution was less than that of consumer discretionary and consumer staples sectors, which were led down by Peugeot S.A. and Pernod-Ricard SA, respectively. Even information technology stocks, which have much less exposure in the portfolio compared to industrials, were bigger negative contributors to return than industrials. French stocks Safran SA and Thales SA supported the industrials sector.
In the next article, we will look at the Putnam Europe Equity Fund: Class A (PEUGX).