Vanguard European Stock Index Fund

Scorecard
3 / 5 Stars
Lipper
2 3 1 5 4
Zacks Investment Research
2 (Buy)
Standard & Poor's
3 / 5 Stars
TheStreet.com
D (Sell)

#11 in Europe Stock

U.S. News evaluated 27 Europe Stock Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Performance

The fund has returned 26.14 percent over the past year, 8.57 percent over the past three years, 19.69 percent over the past five years, and 7.28 percent over the past decade.

Trailing Returns Updated 02.28.2014
Year to date 2.9%
1 Year 26.1%
3 Years (Annualized) 8.6%
5 Years (Annualized) 19.7%
10 Years (Annualized) 7.3%

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Summary

The Vanguard European Stock Index Fund, which tracks the Morgan Stanley Capital International Europe Index, boasts low expenses and highly experienced managers. But that hasn't kept this passively managed fund from enduring the recent woes of European equity markets.

As of March 05, 2014, the fund has assets totaling $22.07 billion. Its portfolio consists of common stocks of European companies. The fund tracks the MSCI Europe Index, which includes 513 common stocks of companies from 16 countries.

The debt-laden PIGS countries (Portugal, Italy, Greece and Spain) only make up a small portion of the fund's total assets. Still, that fact hasn't completely shielded the fund from heavy losses so far this year as the situation across the Atlantic deteriorated. In 2009, Europe-focused funds were helped by the decline of the U.S. dollar and the appreciation of the euro and other currencies like the Swedish krona. However, this fund’s hefty weighting of large firms in Western European markets meant it missed out on the surge among small-company stocks in emerging markets in Eastern Europe in 2009. The fund is dominated by firms based in Britain (including an unfortunately hefty weighting in BP during the Gulf of Mexico oil spill), and its largest sector weighting is in financials. Its largest holdings include HSBC Holdings and Banco Santander, as well as Nestlé, British Petroleum, and France’s Total. The fund has returned 26.14 percent over the past year and 8.57 percent over the past three years.

Over the long term, the fund has done a good job of matching its benchmark. One possible downside for some investors may be that many of the fund’s largest holdings could overlap with broad international funds. The fund has returned 19.69 percent over the past five years and 7.28 percent over the past decade.

Investment Strategy

The fund seeks to track the performance of its benchmark index, the MSCI Europe Index, which invests in major markets throughout Europe. The majority of its holdings, as of June 30, 2010, were in the United Kingdom, France, Germany, Spain and Switzerland.

Role in Portfolio

Morningstar says the fund plays a supporting role in a portfolio.

Management

The fund is passively managed by Duane Kelly and George O’Reilly. Kelly has been with the fund since 1992 and became comanager in 2008. He has been with Vanguard since 1989. O’Reilly has comanaged the fund since 2008 and has been with Vanguard since 1992.

Fees

Vanguard European Stock Index Fund has an expense ratio of 0.26 percent.

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Risk

The fund’s heavy exposure to just four countries—Britain, France, Germany and Switzerland—subjects it to higher country risk than more regionally diversified international funds. The fund is likely to duplicate the holdings of the European portion of broad, large-cap international funds. Morningstar gives the fund an “average” ranking for risk.

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