The Invesco European Growth Fund
In this part of the series, we’ll analyze the Invesco European Growth Fund – Class A (AEDAX). AEDAX, all asset classes, is the fourth largest among its peers with assets worth $1.5 billion under management as of February 2016. The fund releases complete holding data quarterly. As of December 2015, its assets were spread across 70 holdings and included stocks of companies such as WPP (WPPGY), RELX (RELX), British American Tobacco (BTI), UBS (UBS), and Carlsberg (CABGY). These companies make up 10.1% of the fund’s portfolio.
From a purely NAV (net asset value) return standpoint, AEDAX was among the top three performers for the one-year period until March 15, 2016. It was placed second for the period among its peer group. When we refer to the peer group, we mean the group of 12 funds chosen for this review. For return comparison, we have chosen two ETFs: the ALPS STOXX Europe 600 ETF (STXX) and the SPDR Euro STOXX 50 ETF (FEZ). Since the announcement of stimulus measures by the ECB (European Central Bank) on March 10, 2016, FEZ has been only the third least gainer and has underperformed the previously mentioned ETFs.
For evaluating benchmark-related metrics, we’ve chosen the STOXX Europe 600 Index as the benchmark for all funds in this review.
AEDAX’s standard deviation, or the volatility of returns, in the one-year period until March 15, 2016, was 16.3%. This is much lower than both the STOXX Europe 600 Index’s 19.2% and the peer group’s average of 18.4%.
The fund’s risk-adjusted returns, calculated by the Sharpe Ratio, stood at 0.14 for the one-year period ended March 15, 2016. That makes it one of only three funds to have a positive Sharpe Ratio for the period. The ratio was 0.5 for 2015, placing it third among its peers.
The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was 1.3 for the one-year period ended March 15, 2016. It was the third best among all the funds in this review. The information ratio shows the consistency of a fund manager along with measuring the ability to generate excess returns over a benchmark. The higher the reading, the better the consistency.
A note to investors
Among a peer group, if some of the members have a negative Sharpe or information ratio, we can take a look at alpha for evaluating fund performance. Unlike the other two, we can evaluate a negative alpha. AEDAX’s alpha for the one-year period until March 15, 2016, placed it third among its peers. It was also third for 2015. Although its alpha is negative for 2016 year-to-date, it still places fourth among its peers. The numbers thus make AEDAX a possible mutual fund option for your shortlist to gain exposure to European equities.
In the next article, we’ll look at the Columbia European Equity Fund – Class A (AXEAX).