The JPMorgan Intrepid European Fund – Class A (VEUAX) fell 1.3% in December 2015 from a month ago. In the three-month period ending December 31, the fund rose 1.7%. In the six-month period, the fund fell 4.7%. In the one-year period, the fund has returned 1.3%. Meanwhile, from the end of December until January 22, the fund has fallen 7.7%.
VEUAX emerged as a below-average performer for 2015. Among the ten funds in this review, the fund came in seventh. Let’s look at what has contributed to the fund’s below-average performance.
Portfolio composition and contribution to returns
VEUAX has been in existence since November 1995. Thus, it has quite a long track record. According to its latest geographical disclosure, companies from the United Kingdom, France, and Germany have the most weight in the fund’s portfolio.
The latest complete portfolio breakdown available for the fund is from November 2015. Thus, 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 November to December.
Industrials emerged as the biggest sectoral contributor to the fund’s returns in 2015. Danish wind turbine manufacturer Vestas Wind Systems was the top individual contributor from the sector. Germany’s Nordex contributed substantially as well along with Ryanair Holdings (RYAAY). Had it not been for the negative contributions from Adecco, Ashtead Group, and Royal Boskalis Westminster, the sector would have done even better.
Contributions from the consumer discretionary sector followed industrials. Pandora, Barratt Developments, Taylor Wimpey, and Daimler (DDAIF), among others, helped the sector contribute to the fund’s returns. Even though Publicis Groupe (PUBGY) and a few others dragged on the sector a little, they did not substantially hurt the contribution from the sector.
Auto Trader Group and Logitech International (LOGI) helped the information technology sector. Novo Nordisk (NVO) led the healthcare sector while Imperial Tobacco Group (ITYBY), Etablissements Delhaize Frères et Cie “Le Lion” (Groupe Delhaize) (DEG), and Koninklijke Ahold (AHONY) helped the consumer staples sector.
Reasons for poor performance
The financials sector, the biggest sectoral holding of VEUAX, emerged as the worst sector, led by Lloyds Banking Group (LYG) and UBS Group AG (UBS). Coupled with negative contributions from energy, materials, and utilities, financials dimmed the performance of the fund. Also, except the consumer discretionary sector, all other sectors had potent detractors, which did further damage to the fund’s return.
Given that volatility is expected to be generally higher in 2016 than it was in 2015, it’ll be interesting to see whether fund managers keep up their rate of churn. In the next article, let’s take a look at the Vanguard European Stock Index Fund – Investor Shares (VEURX).