The Passive Vanguard Pacific Stock Index Fund: Below Par in 1Q16

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An overview of the Vanguard Pacific Stock Index Fund

In this part of the series, we’ll specifically outline the performance of the Vanguard Pacific Stock Index Fund – Investor Shares (VPACX), which is the class available for retail investors. As of February 2016, the fund was managing assets worth $5.2 billion, making it the largest fund in this review by asset size. It was invested in 2,204 stocks, including stocks of companies such as Tokio Marine Holdings (TKOMY), Nissan Motor (NSANY), Mitsui (MITSY), Nomura Holdings (NMR), and Fujifilm Holdings (FUJIY).

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Fund returns

From a purely NAV (net asset value) return standpoint, VPACX was an average performer among the peer group for the one-year period until March 31, 2016. When we refer to the peer group, we mean the group of nine funds chosen for this review.

Although VPACX is benchmarked to the FTSE Developed Asia Pacific All Cap Index, we’ll consider the MSCI AC Asia Pacific Index as the benchmark to maintain parity of comparison with the other funds in this review. For comparison, we’ve used two combinations of ETFs that provide exposure to stocks from the region. The first combination is the Vanguard FTSE Pacific ETF (VPL) and the Vanguard FTSE Emerging Markets ETF (VWO). The second is the iShares Core MSCI Pacific (IPAC) and the iShares MSCI Emerging Markets (EEM).

Quantitative metrics of the Vanguard Pacific Stock Index Fund

For the one-year period ended March 2016, the standard deviation for VPACX stood at 19%. This was much higher than both the MSCI AC Asia Pacific Index’s standard deviation of 17.8% and the arithmetic average of the standard deviation of all funds in this review, which was 16.8%. VPACX’s returns were the most volatile among the peer group chosen for this review.

The Sharpe ratios for VPACX for the one-year period ended March 2016 and for 1Q16 were negative.

An information ratio shows the consistency of a fund manager and his or her ability to generate excess returns over a benchmark. Considering the MSCI AC Asia Pacific Index as the benchmark, the information ratio of VPACX ranked it fifth among its peers for the one-year period until March 31, 2016.

Investor takeaway

VPACX is the only passively managed index fund in this review. So its returns reflect the benchmark minus the fee charged. For this fund, we could have used its stated benchmark for calculating performance metrics, but that would have made it incomparable to the other funds. Its large asset size shows that a lot of investors prefer the passive method of investing in the Asia-Pacific region. For moderate investors, this may be a potent investment choice. However, more adventurous investors should look at actively managed funds for investing in the region.

The next fund in this review is the Wells Fargo Asia Pacific Fund – Class A (WFAAX).

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