uploads///Scout International Fund Vs Peers

UMBWX’s Volatility Is Low, but Other Key Metrics Are Shaky


Mar. 11 2016, Updated 8:07 a.m. ET

Scout International Fund’s performance

In this article, we’ll outline the performance of the Scout International Fund (UMBWX). The fund is invested in stocks of companies like Syngenta (SYT), Aflac (AFL), ABB (ABB), Barclays (BCS), and Novartis (NVS), among others.

From a purely NAV (net asset value) return standpoint, UMBWX had a poor showing in both the one-year period until February 29 and in 2015 among its 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 UMBWX’s standard deviation, or the volatility of returns, in the one-year period until February 29 was 14.9%. This is much lower than both the ACWX’s 15.4% and the peer group’s average of 15.7%. The fund had the lowest standard deviation in its peer group.

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. Even for 2015, its Sharpe Ratio was negative. It is the only fund in this review to post a negative value for the year.

The information ratio, calculated with ACWX as the benchmark, was 0.87 for the one-year period ended February 29, placing it eighth 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 had placed it dead last among its peers.

A note to investors

The UMBWX fared poorly as far as generating alpha was concerned, both for the one-year period until February 29, 2016, as well as for 2015. YTD 2016 has been much better for the fund, and its standard deviation continues to be the lowest among its peers. However, its quantitative metrics, especially a negative Sharpe Ratio, are bothersome. Investors should look at other mutual funds before making a call on the UMBWX.


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