Mixed Quantitative Metrics for MDEFX until March 15


Mar. 21 2016, Published 12:29 p.m. ET

BlackRock EuroFund overview

In this part, we’ll look at the BlackRock EuroFund – Investor A Shares (MDEFX). MDEFX, all asset classes, is one of the smaller funds in this review. It was managing assets worth $373.5 million as of February 2016. As of December 2015, its assets were spread across 60 holdings and included stocks of companies such as Royal Dutch Shell (RDS.A), Anheuser-Busch InBev (BUD), SAP (SAP), Novo Nordisk (NVO), and BT Group (BT).

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MDEFX performance

From a purely NAV (net asset value) return standpoint, MDEFX stood ninth 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, the fund has emerged as an average performer in its peer group. Although it has outperformed STXX, it has underperformed 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

MDEFX’s standard deviation, or the volatility of returns, in the one-year period until March 15, 2016, was 12.0%. This is much higher than both the STOXX Europe 600 Index’s 19.2% and the peer group’s average of 18.4%. Its standard deviation is the highest among all funds in this review.

The fund’s risk-adjusted returns, calculated by the Sharpe Ratio, were negative for the one-year period ended March 15, 2016. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that. The ratio for 2015 had placed it sixth among its peers.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was 0.2 for the one-year period ended March 15, 2016, ranking it seventh 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

MDEFX’s quantitative metrics are sending mixed signals. While its information ratio is below average, its alpha for the one-year period ended March 15, 2016, is above average. One factor of concern is the high volatility of the fund’s returns. You would do well to take a look at the fund’s investment strategy to see whether that suits your needs. You’ll need to have a medium-term horizon in order to give the fund manager enough time to showcase its skills.

In the next part, we’ll look at the Putnam Europe Equity Fund – Class A (PEUGX).


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