Active International Equity Portfolios Outpace MSCI EAFE Index

The median portfolio in InterSec’s EAFE Plus universe averaged a 5.8% exposure to the emerging markets and posted a 17.3% return year to date ending June. Over the last three years, 65% of portfolios in the peer group outperformed the MSCI EAFE Index return of 22.2%, according to InterSec.

The median growth fund was the frontrunner in the InterSec EAFE Plus universe, returning 11.9% year to date versus 11.3% for core and 10.8% for value.

The median value portfolio return of 10.8% beat the EAFE index by just 10 bps, while outperforming the EAFE Value index by 1.3%. Over the long term, value funds have outperformed growth as the median five-year value portfolio returned 19.9% compared to 17.7% for growth.

The median active manager of emerging markets equities delivered an absolute return of 15.1% for the second quarter, but barely exceeded the MSCI Emerging Markets Index by just 10 basis points.

For the year to date, the median fund return of 18.2% surpassed the benchmark by 60 basis points, mostly due to superior stock selection in China and Russia, according to the research.

For the three year period ending June, the median fund posted a 40.6% return versus the 38.2% for the benchmark. Most managers added value through superior stock selection in Taiwan, and good market allocation throughout Asia and Latin America.