Volkswagen Drove the Columbia European Equity Fund off Road in 2015


Jan. 25 2016, Updated 4:06 p.m. ET

Performance evaluation

The Columbia European Equity Fund – Class A (AXEAX) fell 1.5% in December 2015 from the previous month. In the three-month period ending December 31, the fund rose 2.0%. In the six-month period, it fell 5.1%. In the one-year period, the fund has returned 1.4%. Meanwhile, from the end of December until January 22, the fund is down 7.6%.

The fund has been a below-average performer among the ten funds in this review. Its performance in 2015 placed it sixth among the ten funds we’re reviewing. Let’s look at what has contributed to this below-average performance.

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Portfolio composition and contribution to returns

The AXEAX was launched in June 2000. According to its latest geographical disclosure, the United Kingdom, France, and Germany are the top geographies, in that order. Germany replaced Switzerland in the third spot last month. A couple of months ago, Switzerland was the second largest country for the fund.

Since the latest complete portfolio of the fund available is from November 2015, we will consider that as our base. For December, we will consider valuation changes for our analysis. All portfolio percentages mentioned from here on refer to their weights as per changes in valuation from November to December.

The consumer discretionary sector, the third largest in terms of portfolio weight, emerged as the biggest positive contributor to the fund’s returns in 2015. Danish retailer Pandora led the sector in terms of positive contributions to returns. However, there was a considerable drag on the sector by negative contributions from the preferential shares of Volkswagen (VLKAY) due to the emissions controversy. UK-based publisher Pearson (PSO) also hurt the sector’s performance.

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The healthcare sector had the second highest weight in the fund’s portfolio, and the sector was also the second highest contributor to the fund’s overall returns. A strong performance by Danish company Novo Nordisk (NVO) and the absence of any major negative contributors except Novartis (NVS) and Bayer (BAYZF) helped the sector do well.

Overall, financials were positive contributors for 2015, but UBS Group’s (UBS) positive contribution, the single largest contribution, was nullified by a negative contribution from Barclays (BCS). Anheuser-Busch (BUD) and L’Oréal (LRLCY) helped the consumer staples sector while industrials were led by Airbus Group (EADSY).

Reasons for below-average performance

Apart from individual negative contributors like Volkswagen and Barclays, the energy and materials sectors were instrumental in reducing the positive contribution of other sectors. Royal Dutch Shell (RDS.A) drove down the energy sector while Rio Tinto (RIO) did the same to materials. In 2016, it’ll be interesting to see whether fund managers reduce exposure to these two sectors.

Let’s move on to the next fund in this review: the Brown Advisory – WMC Strategic European Equity Fund – Investor Shares (BIAHX).


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