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What Explains an Average YTD 2016 for the USAA International Fund?


Jun. 27 2016, Updated 9:08 a.m. ET

Performance evaluation of the USAA International Fund

The USAA International Fund (USIFX) is right in the middle of the pack as far as its point-to-point returns for YTD 2016 are concerned—it is placed sixth. However, the past year until June 17, 2016, has been troublesome for the fund as it is placed second to last for the period.

We have graphed its performance against two ETFs: the iShares MSCI ACWI Ex-US ETF (ACWX) and the Vanguard FTSE All-World Ex-US ETF (VEU). Let’s look at what has contributed to this average performance by the fund in YTD 2016.

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Portfolio composition and contribution to returns

Financials have hurt USIFX the most among all sectors in YTD 2016. UBS Group AG (UBS) has led the decliners, which include HSBC Holdings (HSBC) and Barclays (BCS).

Japan’s Denso Corporation has led the consumer discretionary sector downward, with Honda Motor Co. (HMC) and Sky plc also playing important roles in the sector’s poor showing. Yum! Brands (YUM) and Compass Group chipped away at some of the negative contribution, though.

The healthcare sector has been driven down by Bayer (BAYZF), Hoya Corp., and Valeant Pharmaceuticals International (VRX).

Investor takeaway

Although the materials and consumer staples sectors have contributed positively so far in 2016, their contribution is not substantial. The large number of holdings of the fund prevent it from attaining the benefit of a concentrated portfolio.

However, the role of USIFX is different in a portfolio. Its high number of holdings helps one gain exposure to a wide range of stocks. To a certain degree, it also protects from a large negative movement in a certain group of stocks or geographic regions.

In the final article of this series, let’s look at the overall picture that emerges from this analysis.


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