Selecting finalists for this hard-hit group made us feel like a pig-kisser at a county fair.
This year's nominees for Morningstar's International-Stock Manager of the Year have all performed abysmally of late. They have losses with a capital L. The best of the bunch has dropped nearly 30% so far in 2008 and more than half are down more than 40%. Sure, they've all held up much better than the benchmark MSCI EAFE Index and the vast majority of international funds, but that isn't saying much and will be cold comfort to shareholders curled up in the fetal position watching a big chunk of their nest egg vaporize.
To their credit, none of our nominees is even remotely happy with their near-term performance. No one is ordering "We lost less than EAFE in 2008" T-shirts. They all know you can't eat relative returns and that losing less than your rivals is a Pyrrhic victory: Another year like this and these funds would practically be goners.
Fortunately, we don't expect that. The nominee's funds have been caught in a vicious global downturn that has hit all markets. No one has been safe as liquidity has evaporated, and forced selling by hedge funds and other levered vehicles has exacerbated the plunge in share prices. Loads of cheap stocks have gotten even cheaper. They may fall further yet.
But things always look darkest before the dawn. All our nominees have stellar long-term records, and, most importantly, the processes and teams that built these enviable results remain largely intact. They've seen plenty of downturns over the years and lived to tell about it. And remember, the next couple of years will likely look much different than the past two. Veterans like our nominees know that sticking with a proven process matters most when things are bleakest. It lays the groundwork for future gains. As John Templeton noted, you make most of your money in bear markets, you just don't know it at the time.
The managers below continue to do what has brought them success over the long haul, and we are highly confident in them. Markets will rebound. Maybe not tomorrow, next month, or even next year. But they'll come back. They always have. When things are once again looking up, we expect our nominees' funds to remain among the cream of the crop. The difference is that we plan to be lauding them for making more than their peers, rather than losing less. We can't wait.
Christopher Browne, William Browne, John Spears, Tom Shrager, and Bob Wyckoff
Tweedy Browne Global Value
It's a bit of redemption for this fund. Despite posting strong absolute returns from 2003 to 2007, this prudent fund badly lagged more-aggressive peers. Some questioned whether its cautious style was obsolete. But, more than a year into a global downturn, the fund's measured tack has been validated--again. It has lost a ton so far in 2008 but is holding up better than most. And the implosion of a bunch of highfliers has raised the fund's three- and five-year rankings toward the top of its category. This fund has 10% of its assets in U.S. stocks, which has given it a small leg up on most of the other nominees this year.
Jeffrey Coons, Michael Magiera, Marc Tommasi, Christian Andreach, Jeffrey Donlon, Brian Gambill, and Jeffrey Herrmann
Manning & Napier World Opportunities
Manning & Napier is not the most widely known shop. But it's a winner. All its funds use an all-cap, analyst-driven approach that incorporates growth, value, and cyclical plays. The shop is risk-averse, and its funds have done comparatively well in down markets. This one lost much less than the benchmark and its typical rival in the last bear market from 2000 through 2002. Although it's down more than 40% so far in 2008, it's besting its bogy and nearly all of its category peers. This fund's long-term record remains stellar, and we think highly of Manning & Napier's commitment to shareholders.
Hassan Elmasry, Paras Dodhia, Jayson Vowles, and Michael Alison
Van Kampen Global Franchise
This world-stock fund keeps about 80% of its assets in consumer-related stocks, which has given it an edge this year. Morningstar's consumer-services and consumer-goods sectors have held up much better than most in 2008. In a market crisis investors have flocked to the stable, dominant consumer plays that this fund holds, such as Procter & Gamble