Detractors across Sectors Held TEMIX Back in Year-to-Date 2015


Dec. 23 2015, Published 5:02 p.m. ET

Performance evaluation

The Franklin Mutual European Fund Class A (TEMIX) was up 1.7% in November 2015 from a month ago. It was the only fund out of the ten under review to post positive returns for the month. In the three- and six-month periods ended November 30, the fund rose 1.3% and fell 5.1%, respectively.

In the one-year period, the fund has returned 4.0%, while from November’s end until December 22, the fund has fallen a sharp 9.8%. This is the biggest fall in the period. In the YTD (year-to-date) period, the one we’ll be analyzing, the fund is up by 4.0%.

The fund was the best performer for November. However, for the YTD period, it could manage only the sixth rank among the ten funds under review.

Let’s look at what has contributed to the fund’s below-average performance in the YTD period.

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Portfolio composition and contribution to returns

TEMIX has been around for some time. It was launched in July 1996. According to its latest geographical disclosure, companies from the United Kingdom, Germany, and France are the top three invested geographies, in that order. The order has remained the same from a month ago.

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

Financials emerged as the biggest contributing sector to the fund’s performance for the YTD period up to November 2015. The United Kingdom’s Direct Line Insurance Group was the biggest individual contributor to the sector’s returns. Belgian insurer Ageas and the Netherlands-based NN Group were also among the sector’s major positive contributors. However, Germany’s Commerzbank, Italy’s UniCredit (UNCFF), and the UK’s Barclays (BCS) and HSBC Holdings (HSBC) reduced some of the positive contributions.

Other positive contributors included METRO and Deutsche Telekom (DTEGY).

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The consumer discretionary sector was dragged by the preference shares of Volkswagen (VLKAY) and the C series shares of Liberty Global (LBTYA). The energy sector has not been doing well for some time. Holdings such as Royal Dutch Shell (RDS.A) and Repsol dragged the sector down. LafargeHolcim and Anglo American (AAUKY) hurt the materials sector.

Reasons for performance

All major stocks and sector picks did not work for the TEMIX. Though financials provided the necessary thrust, lukewarm contributions from other sectors did not allow the fund to post higher returns. Some large stock picks turned to large detractors for the period, thus hurting the fund.

In the next article of this series, we’ll look at the the JPMorgan Intrepid European Fund Class A (VEUAX).


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