June 2016 fund performance

International Equity funds were tasked with balancing UK and Eurozone exposures carefully amid June's Brexit drama.

Achilleas Taxildaris 25 July, 2016 | 5:00PM
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Achilleas Taxildaris: For Morningstar.ca, I’m Achilleas Taxildaris, and this is your June 2016 fund performance report.

Overall in June, equity markets and currencies had a volatile month, affected by the uncertainty surrounding the UK/European Union membership referendum. The referendum took place on the 23rd of June, and with the Leave vote winning, the status quo was challenged. The markets took a sharp decline, compounded by the depreciation of the UK pound. As the dust settled and many realized that any actual change will take time to materialize, the market somewhat rebounded to improve returns for the month.

For the month of June, the MSCI EAFE in Canadian dollar terms, which is the benchmark predominantly used in the International Equity category, had about a 4% loss. The average fund in the International Equity category did slightly better with a 3.9% loss. We noticed that the index returns in Canadian dollars were somewhat lower for the month versus the local currency returns. That indicates that the Canadian dollar appreciated versus the basket of currencies within the index. The Canadian dollar appreciated about 1.6% over the euro and 10.5% over the pound, but depreciated about 6.6% versus the yen.

Looking at some rated funds within the International Equity category, the Gold-rated Mawer International Equity managed to constrain its losses to less than 1%. Its underweight in Eurozone stocks, as well as prudent stock selection within its Japanese and Europe ex-euro stocks, were positive contributors. Tsuruha Holdings and Swiss multinational Nestle were among these names. From a sector standpoint, the fund's underweight in energy hurt performance, but stock selection within sectors such as financials and consumer defensive was a positive contributor.

Invesco International Growth is a Silver-rated fund managed by the experienced portfolio manager Clas Olsson. The fund underperformed the benchmark for the month with a 4.3% loss, while still outperforming year-to-date by 3.5 percentage points. The fund's overweight in UK stocks detracted, while its lower Eurozone exposure helped. Despite an overweight in consumer cyclical names that got hurt in June, the manager’s stock selection helped mitigate the damage with names such as food provider Compass Group and Chinese automaker Great Wall Motor.

The Neutral-rated Beutel Goodman International Equity matched the benchmark's performance for the month of June, while still outperforming year-to-date by more than 2.5 percentage points. The fund's underweight in UK stocks was not enough on its own to contribute positively, as specific names within the region underperformed. The opposite was the case in Japan, where despite a lower exposure investment, names such as FamilyMart more than countered and positively contributed to the fund's performance for the month. From a sector perspective, the fund's overweight in the materials sector and poor stock selection were negative contributors, whereas its underweight in the financial sector and investment in names such as Singapore's largest bank, DBS Group, were positive contributors.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Compass Group PLC28.88 USD3.26
DBS Group Holdings Ltd27.42 USD-2.80
Great Wall Motor Co Ltd Class H1.53 USD-1.66
Nestle SA ADR103.66 USD-0.09Rating
Tsuruha Holdings Inc58.94 USD-22.57

About Author

Achilleas Taxildaris

Achilleas Taxildaris  Achilleas Taxildaris is analyst for Manager Research and focuses on active strategies.

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