How Materials Hurt the Europe-Focused AXEAX in September

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Performance evaluation

The Columbia European Equity Fund Class A (AXEAX) fell by 3.8% in September 2015 from the previous month. In the three- and six-month periods ending on September 30, the fund fell by 7.0% and 5.4%, respectively. In the YTD (year-to-date) period, the fund fell by 0.6%.

The fund has been very consistent in terms of the position it occupies among the ten funds we’re analyzing in this series. But its performance in our selected period puts it in seventh place. Let’s look at what contributed to AXEAX’s below average performance.

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Portfolio composition and contributions to returns

AXEAX has been around for 15 years, having been created in June 2000. According to its latest geographical disclosure, companies from the United Kingdom, Switzerland, and France are the top three invested geographies, in that order.

Since the latest complete portfolio of the fund available with us is as of August 2015, we will consider that as our base. For September, we’ll consider valuation changes for our analysis. All portfolio percentages mentioned from here on refer to their weights according to changes in valuation from August to September.

Let’s look at a breakdown of AXEAX’s holdings and contributions:

  • Financials were the biggest negative contributors to the fund’s overall returns in September. UBS Group AG (UBS) was the biggest negative contributor to returns among the sector’s holdings, followed by ING Groep NV (ING). Other individual holdings had a much less quantum of negative contribution compared to these two.
  • Materials were the second biggest contributors to returns, even though they formed only about 7.5% of the portfolio. Ireland-based building materials manufacturer CRH (CRH) was primarily responsible for the sector’s poor showing in September.
  • Healthcare closely followed materials in terms of negative contribution to returns. It was led down by the underperformance of Novartis AG (NVS) and Bayer AG (BAYZF).
  • Among individual stocks, major decliners included Volkswagen AG (VLKAY), Airbus Group SE (EADSY) and BT Group (BT).

Reasons behind performance

AXEAX’s exposure to financials cost the fund, and the fund’s low exposure to consumer staples ensured that the sector, which contributed positively to the fund’s returns, was unable to reduce the drag on the fund’s performance.

Continue to the next part of the series for an analysis of the next fund under review, the Fidelity Advisor Europe Fund Class A (FHJUX).

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