The T. Rowe Price European Stock Fund (PRESX) fell 3.3% in September 2015 from a month ago. In the three- and six-month periods that ended on September 30, the fund fell 6.6% and 4.9% respectively. In the YTD (year-to-date) period, the fund returned -1.2%.
For all periods under review, except for the six-month period that ended on September 30, 2015, the fund’s performance puts it in the bottom half of the ten funds we’re analyzing in this review. In the YTD period, PRESX emerged as the third-worst performer among the funds in this review.
Let’s look at what has contributed to this below average performance.
Portfolio composition and contributions to returns
PRESX has the second-longest track record among the ten funds in this review, having been created in February 1990. According to its latest geographical disclosure, companies from the United Kingdom, Switzerland, and France are the top three invested geographies, in that order.
The latest complete portfolio available for the fund is as of June 2015. So for our analysis, we’ll take that portfolio as our base and consider valuation changes as they stood at the end of September 2015. All portfolio percentages mentioned from here on refer to their weights according to changes in valuation from June to September.
Here’s a key breakdown of PRESX’s holdings:
- Financials, consumer discretionary, and industrials are the top three invested sectors by the fund, the first two forming 50% of the fund’s total assets.
- In September 2014, the fund’s holdings in these sectors were the same, although industrials held had a larger share in 2014.
- All other sectors in PRESX have an exposure of 7% or less.
Now let’s look at how these sectors contributed to returns:
- Financials were the biggest negative contributors to the fund’s overall returns for September 2015. The sector was led down by the negative contribution from Zurich Insurance Group. UBS Group AG (UBS) and Bolsas y Mercados Españoles also emerged as negative contributors. However, some of the drag was reduced by positive contributions from real estate company Axiare Patrimonio SOCIMI SA, and banking conglomerate Bankia SA—both from Spain.
- The consumer discretionary sector followed financials in terms of negative contributions to the fund’s returns. Travel retailer Dufry AG led this sector down.
- Industrials was the third-biggest negative contributor to returns. It was led down by the underperformance of Schneider Electric SE.
- The IT (information technology) and utilities sectors emerged as positive contributors to returns for September. The IT sector was led by Wirecard AG and Simcorp A/S. Utilities were led by Red Electrica Corporacion SA and National Grid (NGG).
Among individual stocks, Liberty Global (LBTYA), Technip SA (TKPPY), and Royal Dutch Shell (RDS.B) were also among negative contributors to returns.
In the next part of this series, we’ll move to the next example in our analysis of ten Europe-focused funds, the Europe 30 ProFund Investor Class (UEPIX).