Solid Metrics Make BIAHX Less Volatile Than Peers


Mar. 21 2016, Published 12:28 p.m. ET

Brown Advisory – WMC Strategic European Equity Fund overview

In this part of the series, we’ll be looking at the Brown Advisory – WMC Strategic European Equity Fund – Investor Shares (BIAHX). BIAHX, all asset classes, was managing assets worth $1.1 billion as of February 2016. As of December 2015, its assets were spread across 65 holdings and included stocks of companies such as British American Tobacco (BTI), Smith & Nephew (SNN), Heineken NV (HEINY), Prudential plc (PUK), and L’Oréal (LRLCY). These companies make up 14.9% of the fund’s portfolio.

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BIAHX performance

From a purely NAV (net asset value) return standpoint, BIAHX stood third among its peers for the one-year period until March 15, 2016. 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’s returns have placed it fifth. It’s one of six funds that has outperformed STXX.

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

Other metrics

BIAHX’s standard deviation, or the volatility of returns, in the one-year period until March 15, 2016, was 17.6%. 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 0.16 for the one-year period ended March 15, 2016, making it one of only three funds to have a positive Sharpe Ratio for the period. This ratio for 2015 had ranked it second among its peers.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was 1.7 for the one-year period ended March 15, 2016. That makes it the second 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

BIAHX has generated returns consistently. Its returns are much less volatile than its peers. BIAHX has generated positive risk-adjusted returns in the one-year period ended March 15, 2016. Apart from these metrics, it has emerged as a significant alpha generator as well. Its alpha for this same period ranked it second among its peers. The fund has carried forward this performance in 2016 year-to-date as well. It could make a strong case for finding a place for it in your shortlist of funds investing in Europe.

In the next article, we’ll look at the Fidelity Advisor Europe Fund – Class A (FHJUX).


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