Europe-focused mutual funds

In this series, we reviewed ten Europe-focused mutual funds in terms of their sectoral changes over the past year and the possible reasons for their performance. However, how does the overall portfolio position of these funds look? We’ve used the latest available complete portfolios we have for preparing the graph below.

Where Are Europe-Focused Mutual Fund Portfolios Headed to Now?

Portfolio composition

The graph above provides you with a bird’s-eye view of what you’re in for if you’re investing in any of these ten Europe-focused mutual funds.

Financials are generally the top choice for fund managers as far as sectoral exposure is concerned. Only two funds broke this pattern:

  • the Brown Advisory WMC Strategic European Equity Fund Investor Shares (BIAHX)
  • the Virtus Greater European Opportunities Fund Class A (VGEAX)

They bet on industrials and consumer staples stocks, respectively.

Consumer discretionary stocks command anywhere between 13% (TEMIX) to ~24% (AEDAX) of the funds’ portfolios. Consumer staples present an interesting picture. There are funds (TEMIX) (FHJUX) that are exceedingly underweight on the sector, and then there is the VGEAX, with 39% of its assets invested in the sector. This sector helped the VGEAX tremendously in navigating 2015 successfully so far.

There are mixed views on healthcare as well. The TEMIX has a little over 3% of its assets invested in the sector. On the other hand, the BIAHX has a quarter of its assets invested there.

In terms of asset size, the VGEAX is the smallest at $22.0 million, while the VEURX is the largest at $21.5 billion. These two funds also have the smallest and largest number of holdings at 45 and 1,236, respectively. The oldest among these nine funds has been around since 1986 (FHJUX) while the youngest (BIAHX) is celebrating its second birthday.

What does this mean for investors?

Inflation is stubbornly down in the region, and a slowdown in manufacturing and investment activity is having an impact on the region’s economic growth as well. Energy prices (AMFW) (E) (STO) have been the reason for the depressed levels of inflation. The silver lining is that people continue to consume. However, with the global economy slowing down, the migrant crisis faced by the region, and the unfortunate events in Paris on November 13 may impact a few sectors of the economy by diverting resources to sectors in need.

Mario Draghi, chief of the ECB (European Central Bank), has reiterated that the stimulus measures, scheduled to run through September 2016, can be extended. Moreover, the central bank stands ready to act in case of further need of stimulus.

Financials have not been surefire winners during times of stimulus measures. Meanwhile, if the consumption pattern continues, funds invested in these sectors could benefit. However, if things take a turn for the worse, then defensives like healthcare can be expected to do better.

We did a similar analysis of US equity mutual funds earlier, in case you’re interested. For more analysis of mutual funds, please visit Market Realist’s mutual funds page.

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