Why You Might Reconsider Investing in the BlackRock Pacific Fund

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BlackRock Pacific Fund overview

In this article, we’ll look at the performance of the BlackRock Pacific Fund Investor A Shares (MDPCX), which is one of the classes available for retail investors. As of February 2016, the fund was managing assets worth ~$230 million and was invested in 80 holdings including the stocks of companies like Mitsubishi UFJ Financial Group (MTU), Toyota Motor Corporation (TM), ORIX (IX), Hitachi (HTHIY), and Westpac Banking Corporation (WBK).

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BlackRock Pacific Fund’s returns

From a purely net asset value return standpoint, MDPCX figured among the bottom three funds in its peer group both in the one-year period ending March 31, 2016, and in 1Q16. When we refer to the peer group, we mean the group of nine funds chosen for this review.

As a benchmark for all funds in this review, we’ll look at the metrics of the MSCI AC Asia Pacific Index. Although not all funds use this index as their benchmark, we’ll use this index across this series for parity. For comparison, we’ll use two combinations of ETFs that provide exposure to stocks from the region. The first group consists of the Vanguard FTSE Pacific ETF (VPL) and the Vanguard FTSE Emerging Markets ETF (VWO), and the second group consists of the iShares Core MSCI Pacific ETF (IPAC) and the iShares MSCI Emerging Markets ETF (EEM).

Quantitative metrics of the BlackRock Pacific Fund

For the one-year period ending March 2016, the standard deviation for MDPCX stood at 18.3%. This was higher than both the MSCI AC Asia Pacific Index’s standard deviation of 17.8% and the arithmetic average (16.8%) of the standard deviation of all funds in this review.

The Sharpe ratio for MDPCX was negative both in the one-year period ending in March 2016 and in 1Q16.

The information ratio shows the consistency of fund managers and measures their ability to generate excess returns over a benchmark. Considering the MSCI AC Asia Pacific Index as the benchmark, the information ratio of the MDPCX was negative for the one-year period ending in March 2016, making it one of only two funds to have a negative ratio. Evaluating a negative information ratio may be erroneous, so we won’t do so here.

Investor takeaway

MDPCX was a below-average performer in 2015. Its quantitative metrics worsened for the one-year period ending March 31, 2016, and showed no improvement in 1Q16. The fund uses the same index that we have used in this review as its benchmark. Hence, caution is warranted for investors with holdings in this fund. If you see similar signs for a longer period, you may need to consider moving on to another fund from the category.

The next fund in this review is the Parnassus Asia Fund Investor Shares (PAFSX).

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