Celebrating 40 years of EuroPacific Growth Fund®
Steve Caruthers
Equity Investment Director
Steven Sperry
Investment Product Manager
KEY TAKEAWAYS
  • On April 16, EuroPacific Growth Fund celebrated its 40th anniversary.
  • Through 3/31/24, EuroPacific Growth Fund’s1 lifetime return has beaten both its historical benchmarks index and all funds in the Morningstar Foreign Large Blend, Foreign Large Growth and Foreign Large Value categories with enough history to compare (nine competing funds in total).
  • The fund has seen a wide variety of market conditions in its 40 years, including growth-led markets, value-led markets and a regional bubble in Japan.
  • EuroPacific Growth Fund continues to offer a way to gain exposure to international markets that’s backed by deep research with a long-term perspective.

EuroPacific Growth Fund results based on F-2 share class


Forty years ago, Capital Group introduced the EuroPacific Growth Fund with two theories in mind: first, that diversification across markets could help offset volatility in any one of those markets; and second, that U.S. investors could benefit in the long-term by looking beyond our borders.


Investing abroad in 1984 wasn’t as convenient as it is today. Few fund managers had the extensive research capabilities to offer a fund built around global investment opportunities. But Capital Group has always prided itself on research capabilities, and in lifetime terms, EuroPacific Growth Fund has outpaced its historical benchmark and funds in Morningstar Foreign Large Blend, Foreign Large Growth and Foreign Large Value categories with enough history to compare (nine competing funds in total).


Here’s a look back at how flexibility and deep research over the past 40 years has served EuroPacific Growth Fund’s investors.


Read important investment disclosures.

A 40-year legacy of success

The line chart compares a hypothetical $10,000 investment in EuroPacific Growth Fund on April 16, 1984, the day of its inception, with an identical investment in the fund’s historical benchmark. Both lines fluctuate up and down with the movement of the markets over the decades, but EuroPacific Growth Fund has remained ahead of the benchmark since the late 1990s. In the nearly 40 years between inception and March 31, 2024, the hypothetical investment in the fund would have grown to about $485,000, while the benchmark would have only grown to about $206,000.

Source: Capital Group. As of 3/31/24. Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Past results are not predictive of results in future periods. EuroPacific Growth Fund's inception date is April 16, 1984.

A history of adapting to changing market environments


While we maintain a long-term outlook, EuroPacific Growth Fund has flexibility that has allowed us to adjust to changing market environments and, over many periods, stay ahead of EuroPacific Growth Fund Historical Peer Group averages.


For example, across growth-led markets, like during the onset of the internet era in the late 1990s, EuroPacific Growth Fund returned an average of 248 bps in excess of the historical benchmarks index and 272 bps more than the EuroPacific Growth Fund Historical Peer Group average.


EuroPacific Growth Fund has held up roughly as well in value-led markets, such as years following the dot-com bubble bursting. Across value-led markets like these, EuroPacific Growth Fund returned an average of 71 bps more than the historical benchmarks index and 401 bps more than the EuroPacific Growth Fund Historical Peer Group average.


A flexible mandate has worked in many conditions

This bar chart compares EuroPacific Growth Fund’s results against the benchmark and average of the fund’s historical peer group average in growth-led and value-led environments from 1985 to December 31, 2024. In the 22 years led by value, EuroPacific Growth Fund outpaced the benchmark by an average of 71 basis points and outpaced the EuroPacific Growth Fund Historical Peer Group average by an average of 401 basis points. In the 17 years led by growth, the fund outpaced the benchmark by an average of 248 basis points and outpaced the EuroPacific Growth Fund Historical Peer Group average by an average of 272 basis points.

Sources: Capital Group, Morningstar. As of 12/31/23. Returns reflect EuroPacific Growth Fund’s average annual excess returns over the benchmark and peers from January 1, 1985 to December 31, 2023. Years when value led were those in which the MSCI EAFE Value Index’s cumulative return exceeded the MSCI EAFE Growth Index’s cumulative return. Years when growth led were those in which the MSCI EAFE Growth Index’s cumulative return exceeded the MSCI EAFE Value Index’s cumulative return. The peer average reflects the EuroPacific Growth Fund Historical Peer Group average.

The fund has also thrived during changes in developed or emerging markets leadership, as determined by the MSCI World ex USA Index and MSCI Emerging Markets Index, respectively. In the 10-year period when emerging markets led developed markets by the widest margin (January 1, 2001 through December 31, 2010, as measured by rolling monthly 10-year periods from MSCI Emerging Market Index’s inception January 1, 1988, through March 31, 2024), EuroPacific Growth Fund outpaced the EuroPacific Growth Fund Historical Benchmarks Index by 210 bps. The EuroPacific Growth Fund Historical Peer Group average for this time was 3.05%, which was 374 bps less than EuroPacific Growth Fund’s return for the period. From January 1, 1994, through December 31, 2003, developed markets had their best 10 years relative to emerging markets, and the fund did even better, beating the EuroPacific Growth Fund Historical Benchmarks Index by 384 bps. The EuroPacific Growth Fund Historical Peer Group average for this time was 1.85%, which was 646 bps less than EuroPacific Growth Fund’s return for the period.


Some people have questioned the ability of large funds to remain successful. EuroPacific Growth Fund has been the largest active fund across Morningstar Foreign Large Blend, Foreign Large Growth and Foreign Large Value categories since July 1991 as measured by assets under management from all share classes on a monthly basis. For the one period measured between July 1, 1991, and March 31, 2024, the fund has beaten its historical benchmarks index and every other international fund in Morningstar Foreign Large Blend, Foreign Large Growth and Foreign Large Value categories with enough history to compare (32 competing funds in total).


Since inception through March 31, 2024, it has beaten its historical benchmarks index in 99% of all 10-year rolling monthly periods.


In the past 20 years through March 31, 2024, when the EuroPacific Growth Fund Historical Benchmarks Index has had a positive return, the fund has had a 99% up market capture ratio. When the EuroPacific Growth Fund Historical Benchmarks Index has posted negative returns over that same period, the fund has had a 93% down market capture ratio. In other words, the fund has historically kept up with the historical benchmarks index in good times and provided relative resilience in bad times.


These strong returns over long periods serve as a testament to the rigor of the fund’s investment process and the adaptability of its flexible mandate.


A durable, repeatable investment process


Strong results have benefited our existing shareholders, but new investors can’t buy past results. Instead, investors buy EuroPacific Growth Fund’s process, which we think has been the key to its enduring success.


The fund’s multi-manager structure, a key aspect of The Capital SystemTM, fosters a process that is stable in the near-term while being inherently scalable and repeatable in the long-term. By allowing each portfolio manager to invest in their highest-conviction ideas, the system cultivates a diverse base of experience and decision-making styles.


As portfolio managers come and go, that broad base of experience absorbs the loss of any one individual and smoothly incorporates the ideas of the next person joining the team. This promotes a robust and effective long-term investment process, preserving institutional knowledge and investment approaches that span market cycles.


EuroPacific Growth Fund has successfully replicated this formula for decades, providing a competitive advantage that has been difficult for others to match. The team may change over time, but the process remains consistent.


Short-term challenges don’t disrupt long-term research and outlooks


Despite the strength of long-term figures, recent years have presented challenges. The strong value rotation over the past three years has been a headwind to the fund’s results relative to its current benchmark index, the MSCI All Country World Index (ACWI) ex USA. Similarly, EuroPacific Growth Fund tends to avoid U.S. exposure and hold more emerging markets domiciled companies, and both of those factors have hurt results relative to the Foreign Large Growth peer group.


Thankfully, these kinds of lagging periods have historically been rare, brief and followed by much brighter days.


Out of all the fund’s five-year rolling monthly periods (357 periods in total as of 12/31/23), EuroPacific Growth Fund only trailed the EuroPacific Growth Fund Historical Peer Group average 2% of the time. In the periods that followed those 2% of trailing periods, EuroPacific Growth Fund outpaced the EuroPacific Growth Fund Historical Peer Group average 83% of the time. Across all subsequent periods that followed those 2% of trailing periods, including those in which the fund did not outpace the EuroPacific Growth Fund Historical Peer Group average, it still returned an average excess of 466 bps beyond the EuroPacific Growth Fund Historical Peer Group average.


Comparisons against the historical benchmarks index are similar. Since inception, the fund outpaced its historical benchmarks index 94% of the time across five-year rolling monthly periods and 84% of the time across three-year rolling monthly periods.


The fund rarely trailed its peer group and typically outpaced in subsequent periods

This table looks at EuroPacific Growth Fund’s results against the EuroPacific Growth Fund Historical Peer Group average over three- and five-year rolling monthly periods. Out of 405 total 3-year periods, the fund trailed the EuroPacific Growth Fund Historical Peer Group average 45 times, or 11% of the time. After a trailing 3-year period, the fund went on to outpace the EuroPacific Growth Fund Historical Peer Group average in subsequent 3-year periods 96% of the time. The average excess returns across all subsequent periods, including those in which the fund did not outpace the EuroPacific Growth Fund Historical Peer Group average, was 366 basis points. Out of 357 total 5-year periods, the fund trailed the EuroPacific Growth Fund Historical Peer Group average 6 times, or 2% of the time. After a trailing 5-year period, the fund went on to outpace the peer group average in subsequent 5-year periods 83% of the time. The average excess returns across all subsequent periods, including those in which the fund did not outpace the EuroPacific Growth Fund Historical Peer Group average, was 466 basis points.

Sources: Capital Group, Morningstar. As of 12/31/23. The start date for the results shown is 4/16/84. Fund results are at F-2 shares. “Peer group” here refers to the EuroPacific Growth Fund Historical Morningstar Peer Group average.

The initial years after inception provided a great example of this dynamic in action. EuroPacific Growth Fund’s portfolio managers faced a tough decision in the late ‘80s: Should they invest in soaring Japanese equities at sky-high valuations? The growth of the Japanese equity bubble tempted fund managers with exciting growth, but at expensive prices (as determined by the price-to-earnings ratio).


EuroPacific Growth Fund’s portfolio managers and analysts decided to largely avoid these stocks. After a few years, the markets reflected what our research suggested; these equities were indeed a bubble bound to pop.


In 1989, Japan began to drag international markets while EuroPacific Growth Fund remained relatively steady. For the next five years, EuroPacific Growth Fund would outpace its benchmark by significant margins, including two years in which the fund was nearly flat or in positive territory while the benchmark fell by double-digit percentages.


EuroPacific Growth Fund outpaced MSCI EAFE Index in the years following the Japan bubble bursting

This bar chart compares annual total returns for EuroPacific Growth Fund and the MSCI EAFE Index from 1989 through 1993. In calendar year 1989, EuroPacific Growth Fund gained 24.2 percent while the index gained 10.5 percent. In calendar year 1990, EuroPacific Growth Fund lost 0.1 percent while the index lost 23.4 percent. In calendar year 1991, EuroPacific Growth Fund gained 18.5 percent while the index gained 12.1 percent. In calendar year 1992, EuroPacific Growth Fund gained 2.3 percent while the index lost 12.2 percent. In calendar year 1993, EuroPacific Growth Fund gained 35.6 percent while the index gained 32.6 percent.

Source: Capital Group. Returns shown are annual total returns for EuroPacific Growth Fund and the MSCI EAFE Index from January 1, 1989, through December 31, 1993.

Looking ahead at the next 40 years


Today, we feel confident that our portfolio’s similarly positioned to benefit from market developments in the coming years.


Take industrials, for example. As little as four years ago, the industrials sector was the fifth-heaviest weight in the portfolio. As of March 31, 2024, it is the heaviest weight. This reflects the view among some portfolio managers that we could be on the verge of a new industrial renaissance fueled by energy transition efforts, supply chain reshoring and a sharp post-COVID recovery in air travel.


EuroPacific Growth Fund’s flexible approach to investing in attractively valued companies has helped generate strong results in the past 40 years. We expect it to continue to do so in the next 40 years, as we research companies in emerging and developed markets for those that could be positioned to benefit from innovation, global economic growth and increasing consumer demand.


Sector weights over time reflect a changing landscape of potential investment opportunities

EuroPacific Growth Fund’s sector weighting relative to MSCI ACWI ex USA Index (%)

The chart shows sector positioning for EuroPacific Growth Fund relative to the MSCI ACWI ex USA Index over the past 10 years. Consumer discretionary weighting ranges from a relative minimum of just under 0% to a maximum of 4%; the median relative weight is around 2% and the current weight is just above 0%. Consumer staples weighting ranges from a relative minimum of -4.4% to a maximum of -1.1%; the median relative weight is -3% and the current weight is -1.5%. Energy weighting ranges from a relative minimum of nearly -7% to a maximum of 2.7%; the median relative weight is -1.3% and the current weight is 0.8%. Financials weighting ranges from a relative minimum of -9% to a maximum of -3.7%; the median relative weight is -6.1% and the current weight is -8.3%. Health care weighting ranges from a relative minimum of -1.1% to a maximum of 4.8%; the median relative weight is 2.4% and the current weight is 2.3%. Industrials weighting ranges from a relative minimum of -3.5% to a maximum of 3.6%; the median relative weight is -2.1% and the current weight is 3.6%. Information technology weighting ranges from a relative minimum of 2.3% to a maximum of 7.1%; the median relative weight is 4.9% and the current weight is 3.9%. Materials weighting ranges from a relative minimum of -4.9% to a maximum of 1.8%; the median relative weight is -0.5% and the current weight is 1%. Real estate weighting ranges from a relative minimum of -2.2% to a maximum of -1.4%, which is also the current weighting. The median relative weight for the real estate sector is nearly -1.9%. Communication services weighting ranges from a relative minimum of -3.5% to a maximum of -0.6%; the median relative weight is -1.4% and the current weight is -1.6%. Utilities weighting ranges from a relative minimum of -2.3% to a maximum of -0.3%; the median relative weight is -1% and the current weight is -2.1%.

Source: Capital Group. As of 3/31/24. Weights reflect the relative weight of the stocks in EuroPacific Growth Fund vs. MSCI ACWI ex USA Index over the past 10 years. Relative weights over 0 signify that the fund was more concentrated in a given sector than the index, whereas weights under 0 signify that the fund was less concentrated in a sector.

1The statement here refers to results for A, F-1, F-2, F-3, 529A, 529E, 529F-1, 529F-2, 529F-3, R-2E, R-3, R-4, R-5, R-5E and R-6 share classes.


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Published on August 27, 2024

Steve Caruthers is an equity investment director with 29 years of experience (as of 12/31/2023). He has an MBA from the University of Missouri-Kansas City and a bachelor's degree from the University of Kansas. He is a CFA® charterholder.

Steven Sperry is an investment product manager with 14 years of industry experience (as of 12/31/2023). He holds a bachelor's degree in global business: financial management from Arizona State University. He is a CFA charterholder.

Additional perspectives

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“Historical benchmarks index” results reflect the results of the EuroPacific Growth Fund Historical Benchmarks Index (MSCI All Country World ex USA Index, April 2007–present; MSCI EAFE Index, fund inception–March 2007). Results reflect dividends net of withholding taxes.

Unless otherwise noted, “peers” and “peer group” reflect the EuroPacific Growth Fund Historical Morningstar Peer Group average. The historical peer group average represents the Foreign Large Blend Category from fund inception to November 30, 2014 and Foreign Large Growth Category thereafter. To ensure no survivorship bias, the returns were calculated on a daily basis to capture all funds in the average.

The Morningstar Foreign Large Value category is used at times in this piece. Unlike the Foreign Large Growth category, which features portfolios with fast growth, high price ratios and low dividend yields, the Foreign Large Value category features portfolios with slow growth, low price ratios and high dividend yields. While portfolios in these two categories have different characteristics from one another, we felt it was worth including the Foreign Large Value funds in some places to offer a more thorough comparison to the entire universe of international funds, particularly in the 1980s and early 1990s, when few international funds existed.

MSCI EAFE® (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization weighted index that is designed to measure developed equity market results, excluding the United States and Canada.

MSCI EAFE Growth Index is a free float-adjusted market capitalization weighted index that captures large and mid cap securities exhibiting overall growth style characteristics across Developed Markets countries around the world, excluding the US and Canada. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend.

MSCI EAFE Value Index is a free float-adjusted market capitalization weighted index that captures large and mid cap securities exhibiting overall value style characteristics across Developed Markets countries* around the world, excluding the US and Canada. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield.

MSCI All Country World ex USA Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, excluding the United States. The index consists of more than 40 developed and emerging market country indexes. Results reflect dividends net of withholding taxes. These indexes are unmanaged, and their results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.

MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global emerging markets, consisting of more than 20 emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.

Developed markets refer to countries with mature economies and financial markets. Compared to emerging markets, developed markets have higher levels of income. Developed markets are formally regulated by authorities to ensure they remain relatively free, fair, efficient and open to foreign investors.

Emerging markets refer to countries with growing economies that show the potential for someday becoming developed markets. Compared to developed markets, emerging markets typically have lower levels of income, a smaller impact on the global economy, less diverse exports and less stable financial markets.

The dot-com bubble was a period of U.S. stock market exuberance in the late 1990s and subsequent downturn in the early 2000s. Much of the buying frenzy focused on technology stocks and their involvement in the nascent commercial internet. The bubble burst in 2000 and troughed in late 2002.

Value rotation refers to a strategic shift broadly among investors away from growth stocks and into value stocks. The rotation typically stems from a change in economic conditions, such as a rise in interest rates that increases debt costs for a company that borrows money to grow or a market downturn in which investors seek stable, profitable companies rather than volatile, rapidly growing companies.