Today’s profile in Barron’s features the Tocqueville International Value Fund (TIVFX). This $435 million no-load, mostly-foreign, multi-cap equity fund has a 1.25% capped expense ratio and 42% turnover. According to the article

Over the past 15 years, the fund is up an average of 8.1% annually, twice the average for its Morningstar foreign large blend category and better than 96% of its peers. The fund’s contrarian approach proved particularly effective last year, when it gained 7.3%, versus an 0.81% decline for its benchmark, the MSCI EAFE index.

One of the accessible and long-lived implementations of the fund’s benchmark is the iShares MSCI EAFE ETF (EFA). Alpholio™’s calculations show that over the ten years through March 2016 the fund returned more than the ETF in about 79% of all rolling 36-month periods. The median cumulative (not annualized) outperformance was 8.5%. Similarly, the fund outperformed the ETF in 74% of all rolling 24-month and 66% of 12-month periods over the same interval.

A comparison of returns does not adjust for the fund’s exposures or volatility. To gain more insight into those aspects of the fund, let’s employ the simplest variant of Alpholio™’s patented methodology. In this approach, a reference ETF portfolio with both fixed membership and weights is constructed to most closely track periodic returns of the fund. The difference between the cumulative return of the fund and that of its reference ETF portfolio is the cumulative RealAlpha™ (to learn more about this and other performance measures, please visit our FAQ). Here is the chart and related statistics for Tocqueville International Value over the past ten years:

Cumulative RealAlpha™ for Tocqueville International Value Fund (TIVFX) over 10 Years

At seven years into the analysis period, the fund generated practically no positive cumulative RealAlpha™. In other words, by mid-2013 an investor who put money into the fund at the end of March 2006 would not realize a better return than that produced by the reference ETF portfolio. It was only in the last 30 months of the analysis period that the fund added value over the reference portfolio. The standard deviation of the fund, a measure of volatility of returns, was slightly higher than that of the reference portfolio. The RealBeta™ of the fund, measured against a broad-based U.S. equity ETF, was close to one.

An analysis of the fund over the past five-year period yields similar results:

Cumulative RealAlpha™ for Tocqueville International Value Fund (TIVFX) over 5 Years

An investor who committed money to the fund at the end of March 2011 saw little value added over the reference portfolio until the beginning of 2015. Again, the standard deviation of the fund was slightly higher than that of the reference portfolio.

The following chart shows the static composition of the reference ETF portfolio over the ten-year evaluation period (it should be noted that the reference portfolio somewhat differs between the two analysis periods):

Reference Weights for Tocqueville International Value Fund (TIVFX) over 10 Years

The fund had major equivalent positions in the iShares MSCI Japan ETF (EWJ), iShares MSCI France ETF (EWQ), iShares MSCI United Kingdom ETF (EWU), iShares 1-3 Year Treasury Bond ETF (SHY; representing fixed-income holdings), SPDR® S&P® 400 Mid Cap Growth ETF (MDYG), and iShares MSCI Germany ETF (EWG). The Other component in the chart collectively represents additional six ETFs with smaller constant weights, listed in the above table.

Compared to fixed reference ETF portfolios, the Tocqueville International Value Fund added a modest amount of value over the past five and ten years. In each analysis, the fund outperformed the reference portfolio late in the evaluation period. The fund has a reasonable expense ratio and turnover. However, in the past couple of years it had substantial distributions, above 6.3% of the NAV in 2014 and 3% in 2015. This made the fund less suitable for taxable accounts.

To learn more about the Tocqueville International Value and other mutual funds, please register on our website.


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