Performance evaluation

The Virtus Greater European Opportunities Fund – Class A (VGEAX) fell 2.1% in November 2015 from a month ago. It was the worst performer among the ten funds in this review. In the three-month and six-month periods ended November 30, the fund rose 4.1% and fell 0.1%, respectively. In the one-year period, the fund returned 3.0%. From the end of November through December 22, the fund fell 2.3%. In the YTD (year-to-date) period, the period we’ll be analyzing, the fund rose 7.2%.

VGEAX had a terrible November, emerging as the worst performer. However, for all other periods, it was among the top three performers. For the YTD period, it was the best performer among its peers.

Let’s look at what has contributed to VGEAX’s superlative YTD performance until November 2015.

Unique Positioning Has Helped VGEAX So Far in 2015

Portfolio composition and contribution to returns

VGEAX has the second smallest track record among the ten funds in this review. It has been in existence 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 available for the fund is September 2015. So we’ll take that portfolio as our base and consider valuation changes for our analysis as they stand at the end of November 2015. All portfolio percentages mentioned from here on refer to their weights according to changes in valuation from September to November.

Consumer staples, consumer discretionary, and healthcare—in that order—contributed to VGEAX’s returns for the YTD period until November 2015.

All the managers’ picks in the consumer staples sector contributed positively to returns. They were led by Reckitt Benckiser Group and included Unilever N.V. (UN), Nestlé S.A. (NSRGY), and Philip Morris International (PM).

Paddy Power and Domino’s Pizza Group, a franchise of Domino’s Pizza (DPZ), powered the consumer discretionary sector. Meanwhile, Novo Nordisk (NVO), Grifols (GRFS), and Fresenius Medical Care AG (FMS) helped raise the healthcare sector.

Reasons for superlative performance

Even with a small portfolio, both in terms of number of stocks as well as asset size, stock picks by fund managers have worked in 2015. Although they had a bad November, they still emerged as the best performing fund among the ten in this review.

VGEAX’s unique sectoral and stock composition ensured that the drag by industrials and financials didn’t hurt the fund’s returns much. Loading up on defensive stocks on time, realigning financials, and exiting energy altogether were some of the reasons the fund has done so well this year.

However, investors should look at longer-term performance of the fund to see how its strategies have performed in different market cycles.

In the last part of this series, we’ll take a look at the overall picture that emerges from this analysis.

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