Volatility Not for You? The VEUAX May Not Be Your Cup of Tea



The JPMorgan Intrepid European Fund: Overview

We’ll be analyzing the JPMorgan Intrepid European Fund – Class A (VEUAX) in this article. The JPMorgan Intrepid European Fund (all asset classes) was managing assets worth $989.0 million as of January 2016. As of December 2015, its assets were spread across 79 holdings and included stocks of Novo Nordisk (NVO), BT Group (BT), Anheuser-Busch InBev (BUD), Siemens (SIEGY), and Rio Tinto (RIO), comprising 11.3% of the fund’s portfolio.

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The JPMorgan Intrepid European Fund’s performance

From a purely NAV (net asset value) return standpoint, the VEUAX was a below-average performer in both the one-year period ended February 16, 2016, and in 2015. It placed seventh in the former period and eighth in the latter 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 VEUAX’s standard deviation, or the volatility of returns, in the one-year period ended February 16 was 18.4%. This is a little 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 -0.53, 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 had stood at 0.32 against the index’s 0.02, performing better than the index and helping it post an above-average performance.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was 0.8 for the one-year period ended February 16 – placing it sixth 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

The VEUAX’s alpha for both the one-year period ended February 16 and for 2015 placed it sixth among the 12 funds in this review. Investors should note that the fund’s returns have been among the most volatile in YTD 2016. The fund’s turnover is also quite high. If volatility and frequent churning is not your cup of tea, then you may need to look elsewhere for investing in European stocks. In the next article, we’ll look at the Vanguard European Stock Index Fund – Investor Shares (VEURX).


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