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How Have These Highly Touted Global Funds Fared So Far?

Most of these world-stock funds have gotten off to good starts.

William Samuel Rocco, 08/23/2010

Mutual fund investors have considerably more global-equity options than they did five years ago. Since the end of 2005, the world-stock category has grown to 241 from 131 offerings.

Unfortunately, many of the new funds started with undistinguished managers, unexceptional strategies, or other limitations, so there was little reason to expect a lot from them. And of the more promising ones, several just opened in the past year or two, and therefore their performance records are not lengthy enough to evaluate yet.

However, a handful of the newer world-stock funds started with seasoned and skilled skippers, distinctive disciplines, and other strengths and do have long-enough records to evaluate. Among the class of 2006 or 2007 were Artisan Global Value ARTGX, Harbor Global Value HIGVX, Marsico Global MGLBX, Oakmark Global Select OAKWX, and Thornburg Global Opportunities THOAX.

There were ample grounds to be enthusiastic about these five funds early on, and now that they have a few years of performance to assess, it makes sense to see if they're living up to their early billings.

Artisan Global Value ARTGX
It's not difficult to figure out why this fund opened with a lot of fanfare in late 2007. Artisan is a fundholder-friendly shop that has delivered the goods with a variety of equity offerings. This fund's managers, David Samra and Dan O'Keefe, already had a record of success running Artisan International Value ARTKX. And they were applying the same strict all-cap value strategy on this fund as they used at that foreign small/mid-value offering.

Samra and O'Keefe have executed that strategy well thus far. This fund posted relatively modest losses in the terrible climate that prevailed in its first 15 months, as their high standards and emphasis on solid businesses with no more than moderate debt levels kept them away from the hardest-hit areas. And it has earned superior returns in the generally favorable conditions that have occurred since the global meltdown ended in March 2009, thanks to the overall quality of their stock selection. This fund always has a concentrated portfolio and often sports atypical country and sectors, which come with real risks, but it has certainly bolstered its case in the early going.

Harbor Global Value HIGVX
This fund was launched with good calling cards in mid-2006. Harbor is a fine firm that has done a fine job of choosing subadvisors for its funds. (Five of its subadvised offerings are Fund Analyst Picks.) The subadvisor it selected for this fund, a team from Pzena Investment Management, had earned strong long-term returns at John Hancock Classic Value PZFVX. The team installed the same focused deep-value strategy here as it used there, so there was plenty of reason to be optimistic about the long run here.

Nonetheless, the team has missed the mark more often than not thus far. This fund posted sluggish gains as stocks rallied during its first year and suffered huge losses in the late 2007 to early 2009 equity meltdown, largely because the team made several poor picks in the financials sector. It has earned superior gains during the 17 months since the equity meltdown ended, thanks in part to the team's ongoing commitment to financials stocks. But it has posted a 9% annualized loss since it opened, while its typical peer has incurred a 1% annualized decline. It's too soon to give up on this fund--and the team made some sensible adjustments to the strategy recently--but to date its risks have outweighed its rewards.PAGEBREAK

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