What’s Hampered UNCGX in 2016?


Aug. 29 2016, Updated 8:05 a.m. ET

Performance evaluation of the Waddell & Reed Advisors Global Growth Fund

The Waddell & Reed Advisors Global Growth Fund – Class A (UNCGX) has been a below-average performer for all the periods shown in the graph below. For the YTD 2016 period until August 19, the fund stands eighth among its 12 peers. 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 the fund’s below-average performance in 2016.

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Contribution to returns

The consumer discretionary sector has been the primary drag on the UNCGX in YTD 2016. Carnival (CCL) leads decliners from the sector, which include JD.com (JD), TripAdvisor (TRIP), Honda Motor (HMC), and Fuji Heavy Industries (FUJHY), among others. Amazon (AMZN) has reduced some of the negative contributions with its substantial positive contribution.

Healthcare stocks have failed to heal the fund and have emerged as big negative contributors. Teva Pharmaceutical Industries Limited (TEVA), Acadia Healthcare (ACHC), and Gilead Sciences (GILD) are some stocks that have dragged the sectors into the red. However, positive contributions from HCA Holdings (HCA) and Medtronic (MDT) have been of some assistance in capping the negative contribution by other stocks.

Financials have lost money for the fund, as all holdings have contributed negatively. Intesa Sanpaolo (IITSF), Prudential (PUK), and Signature Bank (SBNY) have all hurt the sector.

Tech stocks have provided some relief to UNCGX. Tencent Holdings (TCEHY), Alibaba Group Holding Limited (BABA), and Visa (V), among several others, have ensured that the sector is firmly in the black. Meanwhile, Halliburton Company (HAL) has helped the energy sector contribute positively.

Investor takeaways

The UNCGX has very high exposure to US stocks, making it unsuitable for those investors who either already have enough exposure to US stocks or want exclusive exposure to international stocks. Those investors who want their fund to be focused on the US, but also provide exposure to some global stocks could consider this fund.

The fund’s high portfolio in light of the below average performance shows that frequent changes in the stock composition have been of little help to the fund’s performance. It also brings into question the ability of the fund manager to choose stocks that work with the fund’s theme.

Let’s now move on to the USAA International Fund (USIFX).


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