HFEAX: How Are Its Short-Term Quantitative Metrics Looking?

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The Henderson European Focus Fund: Overview

We’ll be analyzing the Henderson European Focus Fund – Class A (HFEAX) in this article. The Henderson European Focus Fund (all asset classes) is a large fund—the second biggest by asset size among the funds in this review. It was managing assets worth $3.4 billion as of January 2016. As of December 2015, its assets were spread across 74 holdings and included stocks of Alcatel-Lucent (ALU), Nokia (NOK), AstraZeneca (AZN), Barclays (BCS), and ASML (ASML), which comprise a combined 16.7% of the assets.

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The Henderson European Focus Fund’s performance

From a purely NAV (net asset value) return standpoint, the HFEAX had a hard time in the one-year period ended February 16, 2016. However, it had had an above-average 2015. It placed 11th in the former period and fifth 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 HFEAX’s standard deviation, or the volatility of returns, in the one-year period until February 16 was 18.2%. This is lower than the STOXX Europe 600 Index’s 18.7%, but higher than the peer group’s average of 18.0%.

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, were -0.78, 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 0.26 against the index’s 0.02, performing than the index. However, it ranked seventh among the 12 funds in this review.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was -0.3 for the one-year period ended February 16, making it one of the three funds in this review to have a negative ratio. 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

The HFEAX ranked 11th in terms of alpha and was one of three funds to post a negative alpha in the one-year period ended February 16. In 2015, it ranked eighth in terms of both its alpha and information ratio. Quantitative metrics in the short term are not painting a bright picture for the fund’s performance. However, investors may look at its longer-term performance to see whether the fund suits their requirements style-wise. In the next article, we’ll look at the BlackRock EuroFund – Investor A Shares (MDEFX).

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