Why October Wasn’t the Month for the Putnam Europe Equity Fund


Nov. 24 2015, Published 1:22 p.m. ET

Performance evaluation

The Putnam Europe Equity Fund Class A (PEUGX) rose 4.5% in October 2015 from a month ago. It fell 4.7% in the three-month period ended October 30. It fell 3.3% in the six-month period that ended on the same date. On the other hand, the fund rose 6.4% year-to-date, and 6.1% from a year ago. Despite that, from October’s end to November 23, the fund fell 3.0%. This was the biggest fall among the funds in this review.

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The fund fared poorly in the one-month and three-month periods as can be seen in the above chart. It figured at near the bottom of the pack of the ten funds chosen for this review. However, in the year-to-date and one-year period, it was the third best performing fund. Since we’re focusing only on factors that impacted monthly performance, we’ll only look at those in this article.

Portfolio composition and contribution to returns

The PEUGX has a long track record, having been incepted in September 1990. According to its latest geographical disclosure, companies from the United Kingdom, France, and Switzerland are the top three invested geographies, in that order. These top three areas have remained the same from the previous month.

The latest complete portfolio available for the fund is as of September 2015. Hence, we’ll take that portfolio as our base and consider valuation changes as they stand at the end of October 2015 for our analysis. All portfolio percentages mentioned from here on refer to their weights as per changes in valuation from September to October.

Industrials emerged as the top contributing sector to the fund’s returns by the thinnest of margins. The sector was led by Airbus (EADSY). Siemens Aktiengesellschaft (SIEGY) and ASSA ABLOY AB also contributed a sizable portion of the sector’s returns.

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The sector that industrial nudged past in terms of contribution to return was consumer staples. Even though staples formed only 10% of the portfolio, they contributed more than other larger components like consumer discretionary and healthcare. Unilever (UN) contributed to over a fourth of the sector’s returns. SABMiller (SBMRY) and Kerry Group (KRYAF) also contributed to the sector’s returns. Prudential (PUK) emerged as the biggest contributor to the financial sector while Valeo SA led the consumer discretionary sector.

Reasons for poor performance

October was just not the month for the PEUGX. Its stock picks didn’t contribute as much to the fund as its peers’ did. There were a few detractors as well, and though their negative contributions were quite small, they did reduce from positive contributions that were not very substantial. This resulted in a forgettable month for the fund. Let’s move on to the next fund in this series, the T. Rowe Price European Stock Fund (PRESX).


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