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Analysis: This international equity fund focuses on large and midsized companies that are not listed on any North American stock exchanges. It is run by Standard Life’s internal portfolio management team and uses a number of proprietary research techniques including management interviews, industry conferences, site visits and a detailed fundamental analysis. The team researches and updates more than 2,000 companies which are then rated and ranked in terms of their opinion of quality as well performance outlook.
The end result is a fairly well diversified portfolio holding between 80 and 100 names. The top 10 holdings make up just under 30% of the fund. The manager is fairly active, with a level of portfolio turnover that has averaged 88% for the past five years.
As of December 31, the fund is nearly fully invested, holding 1.8% cash. The fund has 73% of its assets in Europe with theU.K.making up 31% of the fund. Asian holdings represent 25% of the fund, with the biggest exposure beingJapan.
The sector weights are fairly close to the weightings in the MSCI EAFE Index. The fund is overweight in technology and energy and holds an underweight position in telecommunications.
Performance of the fund has been middle of the pack, posting a three year return of 4.4%. That lags the MSCI EAFE Index which returned 6.7% while the average international equity fund returned 6.0%. Volatility of the fund has been in line with both the index and the category average.
Given the fund’s current positioning, combined with the historic track record and volatility, we would expect that it will continue to muddle along. We don’t expect that this is a fund that will shoot the lights out on a consistent basis, nor do we expect it to dramatically underperform. It is our opinion that there are better choices available for investors.