A Look at Low-Ranking VWIGX: High Volatility and Minimal Returns


Feb. 16 2016, Published 5:15 p.m. ET

The Vanguard International Growth Fund’s composition

The Vanguard International Growth Fund – Investor Shares (VWIGX) has been in existence since September 1981. At the end of January 2016, the fund was managing assets worth $20.1 billion and these were spread across 167 holdings at the end of January.

Over half of the fund’s assets were invested in European stocks at the end of January 2016, followed by Pacific countries, which made up 19.7% of the portfolio. Stocks from the United Kingdom take the top spot in country allocation, forming 12.9% of the assets, closely followed by China with 12.1%. Japan rounds off the top three countries invested in, forming 11.5% of the portfolio.

China’s Tencent Holdings (TCEHY) was the fund’s largest holding in December 2015. Among US stocks, Amazon.com (AMZN) has the most exposure. Fiat Chrysler Automobiles (FCAM), Alibaba Group Holding (BABA), Rolls-Royce (RYCEY), and ARM Holdings (ARMH) are other major holdings of the fund.

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Returns of the Vanguard International Growth Fund

The Investor shares of Vanguard International Growth Fund (VWIGX) had a poor one-year period ended January 2016. From a purely NAV (net asset value) return standpoint, the VWIGX stood eighth among the nine funds in this review.

Standard deviation

Standard deviation is used for assessing risks associated with an investment. Simply put, it measures the deviation of a series of returns from the average. A wide deviation reflects a high fluctuation in the returns, resulting in a higher risk, and vice versa.

For the one-year period ended January 2016, the standard deviation for the VWIGX stood at 15.7%. Meanwhile, the arithmetic average of the standard deviation of all funds in this review was 14.5%. Excluding the VWIGX, this average was 14.3%. The volatility of returns of the fund was the second highest among the funds in the review and drove up the average of the peer group.

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Sharpe ratio

For realized returns, the Sharpe ratio assesses the average return on a risk-free asset or security over total risk as represented by a standard deviation. The higher the Sharpe ratio, the better the risk-adjusted performance. The Sharpe ratio for the VWIGX for the one-year period ended January 2016 stood at -0.53, while it had barely risen at 0.03 in 2015.

A note for investors

The VWIGX is among the most volatile funds in this review. Unlike the TGVAX, the fund has not been able to compensate investors for its volatility by posting superior returns. This has been reflected by its risk-adjusted performance. In January 2016, the fund posted the second-worst Sharpe ratio among its peers. Investors should evaluate the fund’s long-term performance before selecting this as their instrument for investing in international mutual funds. In the next and last article of this series, we’ll reflect on investing in international mutual funds in light of the mutual funds chosen for this review.


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