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Patience Required for the Wells Fargo Asia Pacific Fund

David Ashworth

Asia Pacific Mutual Funds: A 9-Fund Comparison for 1Q16

(Continued from Prior Part)

Wells Fargo Asia Pacific Fund overview

In this part of the series, we’ll specifically outline the performance of the Wells Fargo Asia Pacific Fund – Class A (WFAAX), which is one of the classes available for retail investors. As of February 2016, the fund was managing assets worth ~$140 million and was invested in 111 holdings. It includes stocks of companies such as Fujifilm Holdings (FUJIY), UBS Group (UBS), KB Financial Group (KB), China Petroleum & Chemical (SNP), and China Life Insurance Company (LFC).

Wells Fargo Asia Pacific Fund returns

From a purely NAV (net asset value) return standpoint, WFAAX had a poor one-year period until March 31, 2016, compared to the peer group. But it’s seeing better times in 2016. When we refer to the peer group, we mean the group of nine funds chosen for this review.

As a benchmark for all funds in this review, we’ll look at the metrics of the MSCI AC Asia Pacific Index. Although all funds don’t have this index as their benchmark, we’ll use it in this series for parity. For comparison, we’ve used two combinations of ETFs that provide exposure to stocks from the region. The first combination is the Vanguard FTSE Pacific ETF (VPL) and the Vanguard FTSE Emerging Markets ETF (VWO). The second is the iShares Core MSCI Pacific (IPAC) and the iShares MSCI Emerging Markets (EEM).

Quantitative metrics of the Wells Fargo Asia Pacific Fund

For the one-year period ended March 2016, the standard deviation for WFAAX stood at 16.7%. This was lower than both the MSCI AC Asia Pacific Index’s standard deviation of 17.8% and the arithmetic average of the standard deviation of all funds in this review, which was 16.8%.

The Sharpe ratios for WFAAX for the one-year period ended March 2016 and for 1Q16 were negative.

An information ratio shows the consistency of a fund manager along with measuring his or her ability to generate excess returns over a benchmark. Considering the MSCI AC Asia Pacific Index as the benchmark, the information ratio of WFAAX ranked it sixth among its peers for the one-year period until March 31, 2016.

Investor takeaway

WFAAX had a forgettable 2015, as all its quantitative metrics placed it as the second-worst fund among its peers. The situation has improved a bit in the one-year period ended March 31, 2016, and 1Q16 has been generous to the fund as its alpha and information ratios are above average. Investors are waiting to recover their losses in 2015 and then evaluate whether to stay with the fund.

In the last article of this series, we’ll lay out facts and observations that emerge from this analysis in light of the macroeconomic picture of the region.

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