The Invesco European Growth Fund – Class A (AEDAX) fell 1.1% in December 2015 from the previous month. In the three-month period ending December 31, the fund has risen 3.6%. In the six-month period, it fell 2.7%. In the one-year period, the fund has returned 4.5%. Meanwhile, from the end of December until January 22, the fund is down 7.8%.
The fund has been a solid performer for most periods under review. For 2015, it stood third among the ten funds in this review. Let’s look at what contributed to the fund’s strong showing in 2015.
Portfolio composition and contribution to returns
The AEDAX has a long track record that began in November 1997. According to its latest geographical disclosure, the United Kingdom, Switzerland, and Germany are the top three geographies, in that order. Switzerland edged out Germany for the second spot last month.
The latest complete portfolio available for the fund is from September 2015. Thus, we will take that portfolio as our base and consider valuation changes as they stand at the end of December 2015 for our analysis. All portfolio percentages mentioned from here on refer to their weights as per changes in valuation from September to December.
Financials and consumer discretionary sectors were the two biggest positive contributors to the AEDAX’s returns in 2015 with financials edging out the consumer discretionary stocks by a small margin. The preference shares of Sberbank of Russia OJSC were the biggest contributors to the sector’s returns. Deutsche Boerse was a distant second. However, Turkey’s Haci Ömer Sabanci Holding and the UK’s Aberdeen Asset Management were a substantial drag on the sector’s contribution to the fund.
Entertainment company Sky led the consumer discretionary stocks in terms of positive contributions in 2015. However, the overall contribution from the sector was substantially reduced due to negative contributions from Prada (PRDSY).
Industrials were led by Ireland’s diversified investments company DCC. Schneider Electric led the negative contributors, which included Switzerland-based ABB (ABB). Meanwhile, though Syngenta (SYT) contributed positively to the materials sector, Israel Chemicals (ICL) and Vicat pulled the sector into negative territory.
Reasons for strong showing
The fund’s top sectors helped it post a strong performance in 2015. However, there were more than a few potent detractors whose negative contributions weighed on the fund’s returns. Stock picking will be crucial in 2016, given the uncertainty surrounding financial market performance. Fund managers have shown conviction in their picks by sticking to them and keeping turnover low. Investors invested for the medium-term to long-term have been rewarded and can remain hopeful going forward.
Let’s move on to the second fund in this review: the Columbia European Equity Fund – Class A (AXEAX).