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Which Global Issues Will Top Managers Tackle in Chicago?

At the Morningstar Investment Conference, Europe's debt woes, gold's rally, and China should get their due.

Gregg Wolper, 06/07/2011

Yesterday on Morningstar.com, my colleague Russ Kinnel previewed some noteworthy panels featured at this year's Morningstar Investment Conference, which starts tomorrow in Chicago. Here, I'll take a closer look at the issues likely to be raised and questions that may be answered by the managers who focus specifically on the international realm.

The Global Picture
Thursday morning's general session is one event that should attract a lot of attention from attendees and those of you following the conference on Morningstar.com. That panel features three managers who use very wide-ranging strategies, and who thus must make judgments on a wide variety of global topics: Cory Gilchrist of Marsico Capital Management, Anne Gudefin of PIMCO, and Dennis Stattman of BlackRock.

This session is a must-see for those investors who savor hearing broad macro views from accomplished managers. This trio faces fewer constraints than the vast majority of their peers, so they're more likely to make at least some of their decisions based on their opinions on interest rates, attractiveness of a particular country or region, or the valuations of markets and currencies, rather than simply on whether a certain company's stock looks good at its current price. (Though I wouldn't be surprised to hear the latter as well.)

Stattman and Gudefin have both been cautious to the point of pessimism on the U.S. economy for a few years now. (Stattman's not so hot on Europe, either.) Given the latest data on economic growth and job creation, it's hard to imagine that they're any more enthusiastic right now. But who knows? Both managers have also owned gold, and with the price of that metal still on an amazing run, many will be curious to know what they foresee for that commodity.

Meanwhile, Gilchrist's Marsico 21st Century MXXIX, which focuses mainly on the United States, has a huge overweighting in the consumer cyclical sector--an area almost completely absent from Stattman's BlackRock Global Allocation MDLOX and Gudefin's PIMCO EqS Pathfinder PATHX. Hopefully, Gilchrist will explain if that positioning indicates he has a much more positive outlook for the American economy than his fellow panelists do, and if so, why.

Different Approaches to Emerging Markets
Later on Thursday, a panel focusing on emerging markets will be sure to attract interest. Rather than invite managers of emerging-markets funds to discuss this topic, as we've often done in the past, we chose to put together a trio of topnotch international managers who run diversified foreign-stock funds. In other words, they can largely or even completely ignore emerging-markets stocks should they so choose. And they're free to steer their emerging-markets investments to whichever countries or regions they prefer. Furthermore, they have the option to gain emerging-markets exposure through companies based in Europe or Canada or Japan that do much of their business in emerging markets rather than through firms headquartered in emerging markets themselves.PAGEBREAK

The panelists--George Evans of Oppenheimer, David Herro of Oakmark, and Bob Smith of T. Rowe Price--all have invested liberally in emerging markets over the years, but they are flexible on those weightings. For example, Herro's Oakmark International OAKIX currently has just 3% of assets invested in emerging markets (as defined by MSCI). Evans at Oppenheimer International Growth OIGAX has just a bit more. By contrast, Smith doubled the emerging-markets exposure of T. Rowe Price International PAITX when he took over as lead manager in 2007, and the portfolio recently had more than 25% of assets in the developing world.

Why such a vast difference in the size of the emerging-markets stakes? Do Herro and Evans simply think emerging-markets companies are too pricey at current levels compared with opportunities elsewhere, or do they have deeper concerns? And with Smith's fund overweighted in both India and China, it will be interesting to hear why he doesn't share the worries of those who fear inflation pressures and slowing growth rates in both markets.

Income Investing in Asia? 
On Friday, a special panel will feature just one manager: Jesper Madsen of Matthews. He'll be discussing a way to invest in China that looks beyond the popular growth story. That method is revealed in the name of the fund he manages: Matthews China Dividend MCDFX.

For most investors, dividends don't typically come to mind as a key reason to invest in China, or elsewhere in Asia for that matter. Madsen will explain why he thinks they should. Meanwhile, some investors may wonder why anyone would invest in any Chinese company, dividend or no dividend, given the recent news of shaky corporate governance--to put it mildly--in that market. Let's hope Madsen addresses that timely, important topic as well.


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