26 Aug

What’s behind the Dismal Performance of NBQAX?

WRITTEN BY David Ashworth

Performance evaluation of the Nuveen International Growth Fund

For all periods except the month ending August 19 shown in the graph, the Nuveen International Growth Fund – Class A (NBQAX) has figured among the bottom three funds in its peer group of 12 funds chosen for this review. For the YTD 2016 period, the fund stands dead last. We have graphed its performance against 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 this forgettable performance by the fund in YTD 2016.

What’s behind the Dismal Performance of NBQAX?

Contribution to returns

The consumer discretionary sector has driven down the fund in YTD 2016. Even after a substantial positive contribution by Adidas (ADDYY), negative contributions from several stocks like Barratt Developments, Fuji Heavy Industries (FUJHY), and Hostelworld Group have pummeled returns from the sector.

Financials have a similar story. Even after a sizeable positive contribution from ADO Properties, negative contributions from Credit Suisse Group AG (CS), China’s Ping An Insurance, and Japan’s Mizuho Financial Group (MFG), apart from several others, have hurt the sector. Meanwhile, Belgium-based Galapagos (GLPG) and Novo Nordisk (NVO) have been among the chief decliners from the health care sector, driving down returns from the sector into negative territory.

Consumer staples, energy, and materials are the main sectors that have reduced the negative contribution from other sectors. CP ALL Public Company Limited has been the main reason for the positive contribution by the staples sector. While Statoil (STO) has fueled the firm’s energy holdings, Detour Gold and OceanaGold have helped the materials holdings. Gains from the materials holdings were capped by negative contributions from Kinross Gold (KGC), Barrick Gold (ABX), and BHP Billiton (BHP).

Investor takeaways

The NBQAX has had a terrible 2016 so far. Among its top invested sectors, information technology has been almost inconsequential to its performance while financials have hurt the fund. Its high portfolio turnover has not been of any benefit to the fund. High portfolio turnover is not necessarily a bad thing if it’s backed by superior performance. However, this does not seem to be the case for NBQAX. There is no superior performance to speak of, which leads us to believe that there is little thought behind the high amount of portfolio change. Investors should take note of this fact before investing.

Let’s now move on to the Scout International Fund (UMBWX).

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