Why Things Are Looking Up for the AB International Growth Fund


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

Performance evaluation of the AB International Growth Fund

The AB International Growth Fund – Class A (AWPAX) has been an above-average performer in YTD 2016 among the 12 funds chosen for this review. The past six months have been great for the fund with it being placed second among its peers. The below graph compares its performance 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 performance YTD in 2016.

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Contribution to returns

Though the tech sector is only the fourth largest in the portfolio, fund management has increased exposure to stocks from the sector in 2016. This strategy has paid off handsomely with the tech sector emerging as the highest contributor by far in YTD 2016. The sector, which has seen no negative contributors, has been led by Tencent Holdings (TCEHY) and Taiwan Semiconductor Manufacturing (TSM) in nearly equal measure.

Though exposure to consumer staples has been reduced, the sector has still emerged as the second biggest positive contributor this year. Nestlé (NSRGF), Japanese drugstore chain Tsuruha Holdings, and Danone (DANOY) have nearly jointly led the sector. Meanwhile, Siemens Aktiengesellschaft (SIEGY) and Schneider Electric SE have helped industrials.

Financials have been the biggest negative contributors to the total return of the AWPAX in YTD 2016. UBS Group (UBS) and Azimut Holding have led the decliners, which include Flow Traders and UniCredit (UNCFF). However, positive contributions from Partners Group Holding, Bharat Financial Inclusion, and Credicorp (BAP) have partially offset the negative contributions.

The health care sector closely tails financials. It has been led by Vectura Group with Roche Holding (RHHBY) and Bayer (BAYZF) also contributing negatively.

Investor takeaways

Fund management of the AWPAX seems to be changing its earlier defensive stance with higher allocation to consumer discretionary, industrials, and information technology. Its timely exposure to tech stocks has ensured that the stocks comprising that sector have done far better than their peers comprising the sector in the passively managed EFA.

Further, even though financials have been negative contributors, the amount of their contribution to the AWPAX is less than the negative contribution of financials to the EFA. Things are looking up for the fund, and the remainder of 2016 should be interesting to watch.

Let’s now move on to the Calamos International Growth Fund – Class A (CIGRX).


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