Fact Check: IOOF MultiMix International Shares Fund
IOOF’s MultiMix International Shares Fund makes investors the promise “to provide capital growth over the long term by investing in a diversified portfolio of international shares”. Upon closer inspection, its performance and investment allocations mean that it checks out on both arms of this objective.
Capital growth over the long term
The IOOF MultiMix International Shares fund has certainly delivered on its objective here.
Should an investor have put $25,000 (the minimum investment amount) into the fund 10 years ago, it would have been worth $43,574.13 at 2017’s end, based on what FE Analytics shows as the income earned on the fund over that period.
Since its inception at 29 April, 2008, investors’ original minimum investments would now have grown to capital worth $41,322.40.
It’s hard to imagine there would be many investors complaining about nearly doubling their money, especially for a fund that launched smack bang in the Global Financial Crisis.
Its capital growth over the shorter term has been strong too.
Over the last five years to 2017’s end, investors would have seen their initial $25,000 capital investment grow to $40,129.12. Over three years, reinvesting the income delivered on $25,000 of $9,897.93 would have seen that initial investment grow to $34,897.93.
The fund’s returns also help paint a picture of the fund’s performance investors saw over the long term.
Over the ten years to 30 June, 2018, it returned 8.21 per cent, over five years 14.83 per cent, over three years 10.94 per cent, and over the last year it delivered 14.69 per cent.
Across each period, these figures beat the sector average by one to two per cent. While that may not sound like much, in a sector where the average returns are consistently under 15 per cent and often in the single digits, that’s nothing to scoff at.
FE Analytics reveals though, that the fund’s performance against its nominated benchmark, the MSCI All Countries ex Australia Index, has not been as impressive.
The index outperformed the MultiMix International Shares Fund by 1.04, 0.12 and 0.93 percentage points in the ten, five and one-year periods to June’s end respectively. Only over a three-year horizon did the fund return more than the benchmark, delivering 0.69 percentage points more in the three years to 30 June, 2018.
This does not impact the extent to which the IOOF fund has met its stated objective, however. While many funds do state their objective as outperformance of a benchmark, IOOF makes no such promise for this fund.
Investing in a diversified portfolio of international shares
The IOOF International Shares Fund is certainly appropriately focused on international shares, with FE Analytics showing that 99.30 per cent of its $222.3 million in funds under management (FUM) were invested in international equities as of 31 March, 2018.
The remaining 0.70 per cent was invested in the money market; while this again doesn’t influence the extent to which IOOF has met its objective, investors may question why the fund has allocated so little to cash protection.
On the face of it, the breakdown of asset allocation within this international equities block doesn’t scream “diversified portfolio”.
According to FE Analytics, its top three holdings are Microsoft, Samsung Electronics and Alphabet. As these are close to the three biggest giants of the tech world, or at least are in the mix for the top tech stocks with Facebook, Amazon and Apple, it’s not really diversified.
When you look at the allocations to these stocks however, it is less problematic. Holding just 1.27, 1.17 and 1.04 per cent of its FUM respectively in each of Microsoft, Samsung and Alphabet, it doesn’t add up to much.
The IOOF MultiMix International Shares Fund’s top ten holdings at March’s end also shows a preference for China. The China Construction Bank and two Chinese insurance companies feature in the top ten.
Again though, the actual allocation to each of these, each below 0.90 per cent, means that the fund’s promise for diversification isn’t too compromised.
It’s also worth considering that at a time when many managers are saying that China is underpriced and its growth doesn’t look to be letting up, compromising a bit of diversity for the chance of decent growth could be a risk worth taking.
There are, after all, two parts to the IOOF’s fund’s objective, and investors need to bear in mind that it’s a balancing act between growing capital over the long term and having suitable diversification in international shares. According to FE Analytics, the fund is currently striking this balance just fine.
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