Performance evaluation

The Virtus Greater European Opportunities Fund Class A (VGEAX) fell by 0.6% in September 2015 from the previous month. In the three- and six-month periods ending on September 30, the fund fell by 2.0% and 0.6%, respectively. However, in the YTD (year-to-date) period, the fund was up by 2.4%—one of only four funds in this review to have posted positive returns in the selected period.

VGEAX’s returns put it in the top position among all ten funds analyzed in this review across periods. Let’s look at what contributed to this superior performance.

The Virtus Greater European Opportunities Fund Class A’s September Performance

Portfolio composition

VGEAX’s the smallest track-record among the ten funds in this review, having only been around since April 2009. 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 holdings available for VGEAX is as of June 2015. We’ll thus take that portfolio as our base and consider valuation changes as they stood at the end of September 2015 for our analysis. All portfolio percentages mentioned from here on refer to weights according to changes in valuation from June to September.

Here’s a breakdown of VGEAX’s holdings:

  • The fund’s managers have favored the consumer staples sector throughout the last year.
  • Consumer discretionary and health care also form important components and have seen rises in allocation.
  • Financials is the only other sector which has a double-digit exposure in the fund’s portfolio. The fund has no investments in the energy, telecom services, and utilities sectors.

Sectoral contributions to returns

Now let’s look at how VGEAX’s sectors have performed as of September 2015:

  • Financials emerged as the biggest negative contributors. The sector was led down by UBS Group AG (UBS), Svenska Handelsbanken AB, and Banco Bilbao Vizcaya Argentaria SA (BBVA).
  • Stocks from the healthcare sector followed financials and were led down by negative contributions from Roche Holding AG (RHHBY) and the B shares of Novo Nordisk A/S (NVO). Bayer AG (BAYZF) was the only other negative contributor from this sector.
  • Materials and industrials were the only other negative contributors to returns. HeidelbergCement AG led materials down while Bureau Veritas SA led industrials down.
  • On the positive side, the consumer staples sector was the biggest positive contributor to the fund’s returns in September 2015. The sector was driven by contributions from SABMiller (SBMRY), Imperial Tobacco Group (ITYBY), and British American Tobacco (BTI). Negative contributions were seen from Anheuser-Busch InBev SA/NV (BUD).

Reasons driving top-notch performance

VGEAX outperformed all its peers across periods under review because of the performance of consumer staples, which reduced the negative contributions from other sectors to a great degree. This sector’s performance would have been even better if a couple of stock picks from the financial sector had not dragged the fund down.

However, investors should note that the fund’s concentration to consumer staples could be counterproductive for the fund if present market conditions change. Investors would do well look at the long-term performance of the fund to see how its strategies have performed in a different market cycles.

In the next and final part of this series, we’ll take a look at the overall picture that emerges from this analysis of ten Europe-focused mutual funds.

Latest articles

WeWork is gearing up for an IPO. On Wednesday, the company made its IPO filing with the SEC public and expects to garner $3.5 billion from its IPO.

After FCC Chairman Ajit Pai recommended the approval of the T-Mobile–Sprint merger, Representative David Cicilline urged the FCC to allow public comment.

Cresco Labs (CRLBF) is set to report its Q2 earnings on August 21 after the market closes. The company's stock fell 5.3% yesterday.

Cannabis stocks mostly traded in positive territory today. Supreme Cannabis (FIRE) and Aurora Cannabis (ACB) rose about 9.5% and 5.5%, respectively.

NVIDIA (NVDA) stock soared 6% in today’s trading session as its Q2 earnings for fiscal 2020 beat estimates. However, its guidance missed estimates.

Nio Inc. (NIO) has disrupted the automotive space since 2014 but only made waves in the market since its IPO. Investors have suffered numerous setbacks.