Financials, Discretionary Hurting Key Vanguard European Fund


Nov. 20 2020, Updated 2:14 p.m. ET

Performance evaluation of the Vanguard European Stock Index Fund

The Vanguard European Stock Index Fund Investor Shares (VEURX) has fallen 3.2% year-to-date (or YTD). Even after this fall, however, the fund ranks fourth in the group of 12 funds chosen for this review. In the last year, the fund has placed sixth. We’ve graphed its performance against the Vanguard FTSE Europe ETF (VGK) and the iShares MSCI Eurozone ETF (EZU).

Let’s look at what has contributed to this above-average performance YTD.

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Contribution to returns

It’s important to note that unlike any of the other eleven funds under review, VEURX is not actively managed. Its sectoral performance can give you an idea of the performance of the European stock market in general and its underlying benchmark, the FTSE Developed Europe All Cap Index, in particular.

Hence, it can serve as a broad benchmark to all other funds’ performances. Thus, if another fund’s sector has done better or worse than VEURX, then the fund’s stock picks from that sector have been good or poor compared to VEURX.

Financials stocks have been the biggest negative contributors to VEURX YTD as of July 15, 2016. HSBC Holdings (HSBC) has been the biggest negative contributor, though it’s far from being alone. Barclays (BCS), Credit Suisse Group (CS), ING Groep (ING), and Deutsche Bank (DB) are just a few of the companies that have negatively contributed to the sector.

The consumer discretionary sector has also been a sizable negative contributor. Daimler (DDAIF) has led the detractors, which include Continental (CTTAY) and Volkswagen (VLKAY). Telecommunication services stocks have been led down by BT Group (BT), with Telecom Italia (TI), Telefonica (TEF), and Vodafone Group (VOD) also contributing negatively.

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Energy and consumer staples stocks have been VEURX’s biggest positive contributors in 2016 so far. Royal Dutch Shell (RDS.A) (RDS.B) and BP (BP) have fueled the rise in the energy sector, while Nestlé (NSRGF) and British American Tobacco (BTI) have helped the staples sector. Meanwhile, Siemens Aktiengesellschaft (SIEGY) has helped industrials up.

Investor takeaway

Since VEURX is passively managed, we can’t analyze its sector and stock level performances compared to those of other active funds. What we can say is that the fund is popular due to the large number of European securities in which it invests. Its large asset size is reflective of the fact that many investors have taken the index mutual fund route to invest in European equities.

If you’re looking for exposure to European stocks without having to worry about the issues related to active management, this fund could be an investment option.

Let’s move on to the last Europe-focused mutual fund under review in this series, the Virtus Greater European Opportunities Fund Class A (VGEAX).


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