|
|
|
|
Foreign Fund Insight
3 foreign funds that deserve more attention
Foreign funds have had a strong year, and many investors are scrambling to put their money in the sector. These impressive funds haven't received much fanfare.
By William Samuel Rocco, Morningstar
Overseas stocks have posted strong gains this year. Not surprisingly, many investors who've previously shunned international offerings are now looking to buy core foreign holdings, and lots of individuals who failed to rebalance their portfolios as overseas funds lagged in the late 1990s and early 2000s are seeking to do so now. Meanwhile, many investors who already have enough foreign exposure are seeking to add supplemental international offerings to their portfolios, because the foreign small/mid-value and foreign small/mid-growth categories have been at the forefront of this year's rally.
It's always dangerous to rush into a hot offering, of course, but we think that a large-cap foreign fund is essential to a mid- to long-term portfolio and that investors with no or little exposure to such an offering should slowly build a significant stake in one. Moreover, since style diversification has as much merit abroad as it does at home, we believe investors who have the necessary resources should ease their way into a supplemental international offering.
Our Fund Analyst Picks in the five foreign categories remain excellent starting points for investors seeking core or supplemental international offerings. But they arent the only first-rate options. (To see Morningstars list of standout foreign funds, click here.)
Many other foreign large-cap and smaller-cap funds are worth a look, including three relatively unknown offerings:
- Thornburg International Value (TGVAX)
- Sentinel International Equity (SWRLX)
- Third Avenue International Value (TAVIX)
Thornburg International Value
We're surprised that this fund, which opened in mid-1998, has attracted less than $300 million across its four share classes. It's run by William Fries, who has had a lot of success at the more-popular Thornburg Value (TVAFX). Fries relies on the same focused strategy here as he does there. And he has executed that strategy, which combines a diverse mix of value and growth stocks, deftly here. This fund finished in the foreign large-blend category's top decile in each of its first four calendar years and is on pace to do so again in 2003.
Sentinel International Equity
This fund has built a strong risk/reward profile with an experienced manager and a straightforward strategy. Erik Granade, who has run this offering since mid-1994, buys a fairly select set of globally competitive and financially sound large caps that are attractively priced and holds on to them. That no-nonsense style doesn't always work, but Granade has executed it well far more often than not, and the fund's 10-year returns rank in the foreign large-blend group's top quintile. Relatively moderate volatility rounds its considerable appeal. But few investors have noticed: The fund has only about $100 million in assets.
Third Avenue International Value
This fund opened at the end of 2001. It has just $80 million in assets but deserves more attention, particularly from hard-core value fans who are seeking a supplemental foreign offering. It relies on the same miserly and slow-moving discipline as Third Avenue Value (TAVFX) and its other esteemed siblings. Moreover, though he has never run a retail fund before, manager Amit Wadhwaney is a veteran of the firm and has considerable experience running international money. He has made a strong start here. The fund beat two thirds of its foreign small/mid-value rivals in 2002's uneven conditions and is on pace to do so again in this year's surge. Finally, while Wadhwaney's willingness to concentrate and to go his own way courts volatility, the risk he takes on is tempered by his deep-value bent.
Copyright 2003. Morningstar, Inc. All rights reserved.
|
|
|
|
