Is It Worth Remaining Invested in the Columbia European Equity Fund?


Oct. 27 2016, Updated 3:04 p.m. ET

Performance evaluation of the Columbia European Equity Fund

The Columbia European Equity Fund – Class A (AXEAX) has fared poorly in terms of its performance. For all the periods shown in the graph below, the fund figures among the bottom three performers. In YTD 2016, it stands second from the bottom. The chart below depicts its performance against two ETFs—the Vanguard FTSE Europe ETF (VGK) and the iShares MSCI Eurozone ETF (EZU).

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

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Contributions to returns

Several sectors have helped drive down AXEAX’s performance. The most prominent sector is financials, which is the fourth-most-invested sector of the AXEAX. Intesa Sanpaolo S.p.A. (IITSF) and UBS Group AG (UBS) have nearly equally hurt the sector, with the Legal & General Group making a sizable negative contribution as well. Right behind them are ING Groep N.V. (ING) and Prudential plc (PUK), among several others.

The sole positive contributor was 3i Group plc, which has been unable to make inroads into the large negative contribution by other stocks.

The healthcare sector has also ailed the fund. Novo Nordisk A/S (NVO), Bayer AG (BAYZF), and Roche Holding AG (RHHBY) have been the chief negative contributors from the sector. After the healthcare sector comes the consumer discretionary sector, which was weighed down by Continental AG, TUI AG, and ITV Plc. Industria de Diseno Textil SA and Paddy Power Betfair have been positive contributors, but not very effective ones.

The telecom services sector, which barely forms 6% of AXEAX’s portfolio, has been a major negative contributor as well. BT Group plc (BT) has nearly single-handedly driven the sector down, with Deutsche Telekom AG (DTEGY) contributing negatively as well.

Materials have done the most to reduce the fund’s overall negative performance, with Swiss company Sika AG and Irish company CRH plc (CRH) leading the sector up. On the other hand, Rio Tinto plc (RIO) has been a detractor.

ARM Holdings plc and ASML Holding NV (ASML) have led the tech sector up, with Nokia (NOK) dragging a bit. Consumer staples have done the hardest work in reducing the fund’s overall negative performance. Meanwhile, Royal Dutch Shell plc (RDS.B) has nearly single-handedly fueled the energy sector.

Investor takeaway

There has barely been anything positive about AXEAX so far in 2016. The fund has a high portfolio turnover rate and has seen its top-invested sectors contribute negatively. It looks like 2016 is already lost for the fund.

In our view, existing investors may want to consider diversifying away from the fund, and potential investors may want to look at other funds in this review to invest in European equities.

Let’s move on to the next fund in this review: the Brown Advisory–WMC Strategic European Equity Fund – Investor Shares (BIAHX).


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