What’s behind the Calvert International Equity Fund’s Poor Showing?

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Performance evaluation of the Calvert International Equity Fund

The Calvert International Equity Fund – Class A (CWVGX) has had a forgettable 2016 so far, and things don’t seem to have improved since our last review. The fund ranks among the bottom three funds compared to its peers across all periods shown in the graph below. While for the YTD 2016 period, it stands second to last, for the one-year period until August 19, the fund is dead last in its peer group of 12 funds. The below graph shows its performance compared to two ETFs: the iShares MSCI ACWI ex U.S. ETF (ACWX) and the iShares MSCI EAFE ETF (EFA).

Let’s look at what has contributed to the fund’s terrible performance in 2016 YTD.

Contribution to returns

The high exposure to financials, the sector with the most weight in the CWVGX portfolio, has been the most detrimental to the fund’s performance in 2016 so far. France’s AXA SA and Britain’s Standard Chartered have led the negative contributors. Other prominent negative contributors are Banco Bilbao Vizcaya Argentaria (BBVA), Mizuho Financial Group (MFG), and Barclays (BCS). Some of the negative contribution has been negated by private equity company 3i Group and Bank of Montreal (BMO), but has had only a limited positive effect.

Consumer discretionary stocks have also bothered the CWVGX this year. Nissan Motor (NSANY) has led decliners, which include Toyota Motor (TM) and Burberry Group (BURBY).

Consumer staples, industrials, and telecom services have been the biggest positive contributors to the fund this year. Koninklijke Ahold (AHONY) and Unilever (UN) have powered staples, while Atlas Copco and Applied Industrial Technologies (AIT) have led industrials up. Nippon Telegraph and Telephone Corporation (NTT) have boosted telecom services. A major individual contributor has been the iShares MSCI EAFE Index Fund (EFA).

Investor takeaways

To say that the CWVGX is having a forgettable year would be saying the least. Its frequent portfolio and stock-level shifts have not worked and have actually been quite detrimental to the fund. It’s fairly diversified and not concentrated given its stock-level exposure, but fund managers have not been able to find a mix that works. Stock picks from the telecom services sector have been impeccable, but that’s the best we can say about the fund.

Given its high portfolio turnover, it seems quite likely that fund management will continue to churn the portfolio. What will be interesting to see is whether the fund is able to redeem itself by the time 2016 ends.

Let’s now move on to the Fidelity Advisor Overseas Fund – Class A (FAOAX).

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