uploads///Returns of Europe Focused Funds in YTD

Stimulus Tapering, Brexit, and Your Europe Fund Investment


Oct. 27 2016, Updated 1:41 p.m. ET

Draghi maintains suspense on tapering, extension

In its monetary policy statement in October, the ECB (European Central Bank) kept its policy rates unchanged. The meeting had evinced interest because market participants wanted to know more about the ECB’s plans to extend or taper its asset purchase program.

Earlier in October, some unnamed ECB officials told Bloomberg that the central bank may be thinking about tapering its bond buying program.

The ECB chief, Mario Draghi, had nothing to say about either tapering or extending the bond-buying program. At present, the ECB conducts monthly asset purchases of 80 billion euros and is expected to continue until March 2017 or beyond, if required.

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On a question regarding whether extension and tapering will be on the agenda for the December meeting, Draghi responded that the ECB had not discussed the issue at all in its meeting. Although no discussion of either stimulus tapering or extension took place, Draghi did hint at tapering by saying that an abrupt end to bond purchases was unlikely.

The impact of the statement release on the financial markets was moderate. The headline stock indexes in France (EWQ), Germany (EWG), and Italy (EWI) rose between 0.4%–0.6% on October 20. Spain’s (EWP) Ibex was up 1.2% while the UK’s (EWU) FTSE 100 rose just 0.1%.

Brexit vote impact

Although the Brexit vote is now in the history books, the exit negotiations are not. Some European leaders have talked about tough exit negotiations with Britain. Any radical decisions would negatively impact British and European companies, as well as their related ETFs (EZU) (VGK).

Impact on Europe-focused mutual funds

In this series, we’ll look at how YTD 2016 has panned out for Europe-focused mutual funds (IEOAX) (UEPIX). Our analysis of 12 such mutual funds will not be confined to just return performance. We’ll take an in-depth look at the portfolios of each fund and conduct attribution analysis to see which sectoral or stock picks helped or hurt these funds.

We’ll also compare the performance of the active funds with passive funds in order to give you an idea whether active or passive funds are doing better during this volatile year.

We’ll begin our analysis with the Invesco European Growth Fund – Class A (AEDAX).


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