TEMIX Has a Miss in One Year until March 15


Mar. 21 2016, Published 12:30 p.m. ET

Franklin Mutual European Fund overview

In this part, we’ll be looking at the Franklin Mutual European Fund – Class A (TEMIX). TEMIX, all asset classes, is among the top three funds for asset size in this review. It was managing assets worth $2.7 billion as of February 2016. As of December 2015, its assets were spread across 78 holdings and included stocks of companies such as Nokia (NOK), Deutsche Telekom (DTEGY), XL Group (XL), Koninklijke Philips (PHG), and UniCredit SpA (UNCFF).

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TEMIX performance

From a purely NAV (net asset value) return standpoint, TEMIX stood dead last among its peer group 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 has been among the top three performers and has beaten 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

TEMIX’s standard deviation, or the volatility of returns, in the one-year period until March 15, 2016, was 18.5%. This is lower than the STOXX Europe 600 Index’s 19.2% but a shade higher than the peer group’s average of 18.4%.

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 last among its peers.

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The information ratio, calculated with the STOXX Europe 600 Index as the benchmark, was -0.7 for the one-year period ended March 15, 2016. 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. However, we can’t evaluate a negative ratio.

A note to investors

TEMIX had a terrible 2015. Things haven’t gotten better in the one-year period ended March 15, 2016. Its alpha for the period was the worst among its peers. Coupled with a negative information ratio, it tells us that return generation has been a problem even though the standard deviation hasn’t been on the higher side a lot. At this juncture, investors may want to consider other options for investing in European equities via mutual funds.

Next, we’ll take a look at the JPMorgan Intrepid European Fund – Class A (VEUAX).


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