The BlackRock EuroFund: Volatility Continues into 2016



The BlackRock EuroFund: Overview

We’ll be analyzing the BlackRock EuroFund – Investor A Shares (MDEFX) in this article. The BlackRock EuroFund (all asset classes) is one of the smaller funds in this review. It was managing assets worth $391.5 million as of January 2016. As of December 2015, its assets were spread across 60 holdings and included stocks of Royal Dutch Shell (RDS.A), Anheuser-Busch InBev (BUD), SAP (SAP), Novo Nordisk (NVO), and BT Group (BT).

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The BlackRock EuroFund’s performance

From a purely NAV (net asset value) return standpoint, the MDEFX found itself near the bottom of the pack for both the one-year period until February 16, 2016 and the year 2015. It placed ninth in the former period and 11th in the latter among the 12 funds chosen for this review. For a returns comparison, we’ve chosen two ETFs: the ALPS STOXX Europe 600 ETF (STXX) and the SPDR EURO STOXX 50 ETF (FEZ).

Other metrics

The MDEFX’s standard deviation, or the volatility of returns, in the one-year period ended February 16 was 21.7%. This is much higher than both the STOXX Europe 600 Index’s 18.7% and the peer group’s average of 18.0%, and made it the most volatile fund in the period among its peers.

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, were -0.42, compared with the STOXX Europe 600’s -0.69 for the one-year period ended February 16. Rather than evaluating a negative Sharpe ratio, let’s look at its ratio for 2015. It stood at 0.28 against the index’s 0.02, performing better than the index.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was 0.6 for the one-year period ended February 16, placing it seventh among the 12 funds in this review. The information ratio measures the fund manager’s consistency and ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. Investors should remember that we can’t evaluate a negative information ratio.

A note to investors

Though the MDEFX’s information ratio was less than impressive, its alpha ranked it in the fourth spot for the one-year period ended February 16. As well, in 2015, its information ratio was much lower than that of its peers, but its alpha showed it as an above-average performer. The fund’s volatility has continued into 2016 and it also has a high portfolio turnover. Investors need to consider these aspects while deciding whether to invest in the fund. In the next article, we’ll look at the Putnam Europe Equity Fund – Class A (PEUGX).


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