Why Franklin International Growth Fund’s Performance Was a Mixed Bag

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Franklin International Growth Fund’s performance

In this article, we’ll specifically outline the performance of the Franklin International Growth Fund – Class A (FNGAX), which is one of the classes available for retail investors. The fund is invested in stocks like Delphi Automotive (DLPH), Luxottica Group (LUX), Mercadolibre (MELI), TAL Education Group (XRS), and ARM Holdings (ARMH), among others.

From a purely NAV (net asset value) return standpoint, FNGAX emerged as an average performer for both the one-year period until February 29, 2016, as well as in 2015 among the peers chosen for this series. For return comparison, we have chosen two ETFs: the iShares MSCI ACWI ex U.S. ETF (ACWX) and the Vanguard FTSE All-World ex-US ETF (VEU). For evaluating benchmark-related metrics, we’ve chosen ACWX as the benchmark for all funds in this review, as it tracks the MSCI All Country World ex-U.S. Index.

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Other metrics

The FNGAX’s standard deviation, or the volatility of returns, in the one-year period until February 29 was 16.3%. This is higher than both the ACWX’s 15.4% and the peer group’s average of 15.7%.

The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for the one-year period ended February 29. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that. The ratio stood at 0.2 for 2015, placing it seventh among its peers.

The information ratio, calculated with ACWX as the benchmark, was 1.2 for the one-year period ended February 29, placing it fifth among its peers. The information ratio shows the consistency of fund managers and their ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2015, the fund’s information ratio stood in ninth place among its peers.

A note to investors

The alpha generated by the FNGAX for the one-year period ended February 29 placed it third among its peers. However, in 2015, the metric had ranked the fund seventh. The YTD 2016 period has been good for the fund, as it has emerged as the second best alpha generator. Its returns have been quite volatile lately, making it unsuitable for conservative investors.

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