The Vanguard European Stock Index Fund: A Forgettable Year?



The Vanguard European Stock Index Fund: Overview

We’ll be analyzing the Vanguard European Stock Index Fund – Investor Shares (VEURX) in this article. The Vanguard European Stock Index Fund (all asset classes) is by far the largest fund in this review by asset size. At the end of January 2016, it was managing assets worth $19.4 billion. As of December 2015, its assets were spread across a staggering 1,251 holdings and included stocks of GlaxoSmithKline (GSK), AstraZeneca (AZN), Daimler (DDAIF), Banco Santander (SAN), and Diageo (DEO), which comprise 4.5% of the fund’s equity portfolio.

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The Vanguard European Stock Index Fund’s performance

From a purely NAV (net asset value) return standpoint, the VEURX had a forgettable performance in both the one-year period ended February 16, 2016 and in 2015. It stood tenth in the former and 12th in the latter period among the 12 funds chosen for this review. For a returns comparison, we have chosen two ETFs: the ALPS STOXX Europe 600 ETF (STXX) and the SPDR EURO STOXX 50 ETF (FEZ).

Other metrics

The VEURX’s standard deviation, or the volatility of returns, in the one-year period ended February 16 was 18.6%. This is equivalent to the STOXX Europe 600 Index’s 18.7%, and higher than the peer group’s average of 18.0%.

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, were -0.71, compared with the STOXX Europe 600’s -0.69 for the one-year period ended February 16. Its Sharpe ratio for 2015 was also negative, though marginally so, at -0.01.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was -1.0 for the one-year period ended February 16, making it one of three funds to have a negative information ratio. The metric was negative for 2015 as well. 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. We can’t evaluate a negative information ratio, though.

A note to investors

We’d like investors to note that the VEURX, unlike any other fund in this review, is a passively managed index fund. Therefore, its fund manager cannot take active bets and has to follow the allocation of the underlying benchmark. Due to this, we can’t compare its quantitative metrics to those its peers, we can only present them to you. What we can say, though, is that investors who are not certain about investing in an actively managed product could find passive funds like these to be good starting points for investing into mutual funds. In the next article, we’ll look at the Virtus Greater European Opportunities Fund – Class A (VGEAX).


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