Performance Breakdown of the Parnassus Asia Fund (PAFSX)

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Returns of the Parnassus Asia Fund (PAFSX)

From a purely NAV (net asset value) return standpoint, in the one-year period ending January 2016, PAFSX was the worst performing fund among the nine funds chosen for this review. As a benchmark for all funds in this review, we’re using the MSCI AC Asia-Pacific Index.

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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 its average. A wide deviation reflects high fluctuation in returns, resulting in higher risk, and vice-versa.

For the one-year period ending January 2016, the standard deviation of PAFSX stood at 14.2%. The MSCI AC Asia-Pacific Index had a standard deviation of 16.1% over the same period, while the arithmetic average of the standard deviation of all funds in this review came in at 15.3%. Hence, the returns of PAFSX were less volatile than both the peer group average as well as the index.

The Sharpe Ratio

For realized returns, the Sharpe Ratio assesses the average return of a risk-free asset or security (like US Treasuries of a certain maturity) over its total risk, as represented by its standard deviation. The higher the Sharpe Ratio, the better the risk-adjusted performance.

The Sharpe Ratio for PAFSX for the one-year period ending January 2016 stood at -1.32. This risk-adjusted measure stood at -0.62 for the index. Notably, PAFSX had the lowest Sharpe Ratio among the nine funds in this review and was a substantial underperformer compared to the index.

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Other metrics

The information ratio shows the consistency of a fund manager along with measuring his ability to generate excess returns over a benchmark. Given the benchmark, the information ratio of PAFSX was -1.15 during the one-year period ending January 2016, making it one of two funds among our nine with a negative information ratio for the period.

Meanwhile, the beta of the fund stood at 0.75, making it less susceptible compared to the index to volatility.

A note for investors

PAFSX invests in Air Lease Corporation (AL), Qualcomm (QCOM), Expeditors International (EXPD), and Taiwan Semiconductor Manufacturing (TSM), and among our nine, it was the worst performer in the one-year period ending January 2016. Its risk-adjusted measures were bad, and its alpha was negative. Its high exposure to China proved detrimental to the fund. Investors invested in this fund with a short-term investment horizon should look for other alternatives.

Now it’s time for the next fund in our Asia-Pacific roster: the Invesco Pacific Growth Fund Class A (TGRAX).

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