Virtus Greater European Opportunities Fund overview

In this part of the series, we’ll look at the Virtus Greater European Opportunities Fund – Class A (VGEAX). VGEAX, all asset classes, is the smallest fund in this review and was managing assets worth $27.6 million as of February 2016. As of December 2015, its assets were spread across 47 holdings and included stocks of companies such as British American Tobacco (BTI), Philip Morris International (PM), SAP (SAP), Priceline (PCLN), and SABMiller (SBMRY). These companies comprised 20.0% of the fund’s portfolio.

Why Did VGEAX’s Performance Top the Rest?

VGEAX performance

From a purely NAV (net asset value) return standpoint, the performance of VGEAX looks like an anomaly. While all other funds have fallen in the one-year period until March 15, 2016, VGEAX has risen, making it the clear leader of our pack of 12 funds. For return comparison, we have chosen two ETFs: the ALPS STOXX Europe 600 ETF (STXX) and the SPDR Euro STOXX 50 ETF (FEZ). However, since the announcement of stimulus measures by the ECB (European Central Bank) on March 10, 2016, the fund hasn’t been among the beneficiaries. It stood last among its peers and failed to beat both STXX and FEZ.

For evaluating benchmark-related metrics, we’ve chosen the STOXX Europe 600 Index as the benchmark for all funds in this review.

Other metrics

VGEAX’s standard deviation, or the volatility of returns, in the one-year period until March 15, 2016, was 15.5%. 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 returns have the lowest standard deviation in the peer group.

The fund’s risk-adjusted returns, calculated by the Sharpe Ratio, stood at 0.43 for the one-year period ended March 15, 2016. This made it one of only three funds to have a positive Sharpe Ratio for the period. The ratio for 2015 had ranked it first among its peers.

The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was 1.9 for the one-year period ended March 15, 2016. That made it the best among 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

Along with impressive risk-adjusted performance and consistency of returns, VGEAX’s alpha for the one-year period ended March 15, 2016, topped the list and stood in the double digits. Year-to-date in 2016, its alpha has been the best among its peers. Quantitative metrics are definitely on this fund’s side. The fund’s low volatility is also an asset. Together, these could make VGEAX a very strong contender for your shortlist of funds investing in Europe. Investors should look at VGEAX’s investment strategy, however, to see if they’re comfortable with the portfolio’s allocation.

In the last article of the series, we’ll look at the overall picture that emerges from this analysis.

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