Should You Remain Invested in the Columbia European Equity Fund?


Jul. 27 2016, Updated 3:32 p.m. ET

Performance evaluation of the Columbia European Equity Fund

The Columbia European Equity Fund Class A (AXEAX) has fallen 6.6% YTD (year-to-date). Due to this sharp fall, the fund has emerged as a below-average performer in the group of 12 funds chosen for this review.

The past three months have been quite poor for the fund, and even the one-year period places it as a below-average performer. 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 the fund’s below-average performance YTD.

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Contribution to returns

Financials, the fourth-largest sector in AXEAX, has been the chief cause of the below-average performance of the fund YTD. UBS Group (UBS), Intesa Sanpaolo (IITSF), and Legal & General Group have nearly equally hurt the sector. Right behind them are ING Groep (ING) and Prudential (PUK), among several others. 3i Group has been the sole positive contributor, but it’s been unable to make inroads given the overwhelmingly negative contributions of other stocks.

Consumer discretionary is a distant second to financials in terms of negative contributions. Continental, TUI, and InterContinental Hotels Group (IHG) have led the sector down. RELX Group (RENX) and Paddy Power Betfair have been positive contributors, but not very effective ones.

The telecommunications services sector, which forms barely 6% of the fund’s portfolio, tails discretionary. BT Group (BT) has single-handedly driven the sector down. Meanwhile, healthcare has been hurt by Bayer (BAYZF) and Novartis (NVS), among others.

Consumer staples have done the hardest work in reducing the overall negative performance of the fund. Unilever (UL) and British American Tobacco (BTI) have helped the sector the most. The absence of any major detractors has also helped. Meanwhile, Royal Dutch Shell (RDS.B) has nearly single-handedly fueled the energy sector.

Investor takeaway

AXEAX has fared worse YTD than the passively managed SPDR EURO STOXX 50 ETF (FEZ). The active fund’s stock picks from the consumer staples, financials, and materials sectors have done better than those making up these sectors in FEZ. However, the telecommunications services, industrials, and consumer discretionary sectors have been quite disappointing.

A noteworthy feature of AXEAX is its high portfolio turnover. A high turnover is not a bad thing if the frequent changes boost performance, but this hasn’t been the case with AXEAX so far. Existing investors may want to diversify away from the fund, while potential investors may want to look at other funds for investment in European equities.

Let’s move on to the next fund in this review, the Brown Advisory WMC Strategic European Equity Fund Investor Shares (BIAHX).


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