Performance evaluation of the Ivy European Opportunities Fund
The Ivy European Opportunities Fund – Class A (IEOAX) fell a sharp 6.8% in 1Q16, placing it firmly at the bottom of the pack of 12 funds in this review. In the past one year, the fund has fallen 9.2%, forcing it to figure among the bottom three funds in its peer group. Meanwhile, from the end of December 2015 until April 25, 2016, the fund has risen 1.4%. In the graph below, you can see its performance against two ETFs: the Vanguard FTSE Europe ETF (VGK) and the iShares MSCI Eurozone ETF (EZU).
Let’s look at what has contributed to IEOAX’s forgettable performance in 1Q16.
Portfolio composition and contribution to returns
Financials, IEOAX’s third-biggest invested sector, was the biggest negative contributor to the fund’s returns in 1Q16. Barclays (BCS) was by far the biggest individual negative contributor from the sector. HSBC Holdings (HSBC), Prudential (PUK), and UBS Group (UBS) were all major decliners as well. There was no positive contributor to speak of.
Information technology was a surprise major negative contributor. Wirecard and Just Eat hurt the sector’s returns.
Consumer staples was the largest positive contributor among all sectors. Marine Harvest (MHG) was the standout performer from the sector. Other performers included Glanbia and Imperial Brands (ITYBY).
Although financials and healthcare were the two main sectors that hurt IEOAX in 1Q16, it was stock picks from the information technology sector that added insult to injury. Even the fund’s energy picks contributed negatively in the period. There was positive contribution from consumer staples and industrials, but their combined impact was muted by the negative contributions of other sectors.
IEOAX grossly underperformed passively managed VGK in 1Q16. Except for stock picks from the consumer discretionary and consumer staples sectors, all other sectors underperformed their peers in VGK.
The fund’s performance doesn’t give investors much confidence in the manager. With that said, it’s important to note that the new manager took up reigns of the fund only two years ago. Some investors who have lost a sizable amount of money in this investment may stick with the manager to see if he can turn things around.
In the next part of this series, we’ll take a look at the Putnam Europe Equity Fund – Class A (PEUGX).