Performance evaluation of the Wells Fargo Asia Pacific Fund
The Wells Fargo Asia Pacific Fund – Class A (WFAAX) stands sixth among its eight peers given its point-to-point return performance in 2016 YTD. However, in the one-year period until June 24, the fund is second to last among its peers. We have graphed its performance against two combinations of ETFs: the Vanguard FTSE Pacific ETF (VPL) with the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares Core MSCI Pacific ETF (IPAC) with the iShares MSCI Emerging Markets ETF (EEM).
Let’s look at what has contributed to this poor performance by the fund in YTD 2016.
Portfolio composition and contribution to returns
Industrials have emerged as the biggest drag on the WFAAX in 2016. PT Blue Bird and Japan Airlines (JAPSY) have been among the chief stocks that have led the decline. Financials, the sector with the most weight in the fund, has also troubled the fund in 2016. Mitsubishi UFJ Financial Group (MTU) has led detractors from the sector. Though China Life Insurance (LFC) has been liquidated, its negative impact is still being felt by the fund.
ZTE and Hitachi (HTHIY) have hurt the information technology sector. Baidu (BIDU), FUJIFILM Holdings (FUJIY), and Alibaba Group Holding Limited (BABA) are also among the sizable negative contributors. Toyota Motor (TM), Bridgestone (BRDCY), and Panasonic (PCRFY) have led the consumer discretionary sector down. However, Tata Motors Limited (TTM) and a few others have softened the impact somewhat.
China Petroleum & Chemical (SNP) has almost singlehandedly fueled the energy sector and reduced some of the negative returns posted by the fund.
In 2016, the WFAAX has underperformed both combinations of ETFs that were outlined earlier in the article. Plus, in the one-year period until June 24, the WFAAX has been one of just two funds that has underperformed both combinations of ETFs. Its portfolio turnover is quite high, and given its below-average performance, that strategy doesn’t seem to be working. Investors should look for other investment options if they’re interested in investing in Asia Pacific.
In the last article of the series, let’s look at the overall picture that emerges from this analysis.