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Who's on Top of the International-Stock Fund Rankings?

The 10 biggest foreign money managers go toe to toe.

Russel Kinnel, 04/08/2008

Last week, I examined how the 10 largest taxable-bond shops shake out. This week, it's time for international stock--that last bastion of positive returns and fund investor inflows. At least until this year anyway.

For those tuning in late, I look at how the 10 largest managers of international funds performed, relative to peers, for the three years through February 2008 and through February 2005. Then, I weight those performance rankings based on assets at the beginning of the periods. The difference in those asset-weighted rankings says a lot about how well firms handle growth.

To get on the list of biggest international-stock managers, you probably had some great performance at some point to draw those assets. The question is, can you keep your best people, add more staff, and invest the money in an effective way when you have $40 billion to run instead of $40 million?

 Top 10 International-Stock Fund Families by Asset-Weighted Three-Year Rank

3-year
Asset-Weighted
Rank (Feb. 2005)

3-year
Asset-Weighted
Rank (Feb. 2008)
Change in Rank
Julius Baer
2
8
-6
Dodge & Cox
9
20
-11
American Funds
28
20
8
Artisan
57
27
30
Vanguard
30
33
-3
Fidelity
27
44
-17
T. Rowe Price
47
53
-6
OppenheimerFunds
34
55
-21
AllianceBernstein
11
65
-54
Franklin Templeton Investments
41
70
-30

1. Julius Baer, on Average, Top 8% of Respective Categories
This is essentially a one-fund story, as Julius Baer International Equity BJBIX has $22 billion in assets while Julius Baer Global Equity BJGQX has just $99 million in assets. (Julius Baer International Equity II JETIX has $9 billion, but it doesn't have a three-year record.) As the firm's position at the top of the rankings indicate, International has continued to thrive. Despite the huge growth at this now-closed fund and its sequel, managers Richard Pell and Rudolph-Riad Younes have done a remarkable job maneuvering around wildly different market environments. They have outperformed the foreign large-blend peer group in every single calendar year since they took over in 1995, and they've beaten the MSCI EAFE in all but one year.

2. Dodge & Cox, Top 20%
This is also a one-fund story and a case of tremendous consistency. Unlike Julius Baer, Dodge & Cox International Stock DODFX has more managers and analysts supporting it and sticks strictly to individual stock selection rather than top-down themes. It just shows that there are many paths to success. With low costs, great management, and strong stewardship, this is one of the no-brainers of foreign stock funds.

3. American, Top 20%
We're taking a huge step up in size of operations and money managed by going from Julius Baer and Dodge to American. Consider that Baer's $22 billion behemoth would rank second-smallest against American's five international giants. It's truly impressive that American could deliver such strong performance at that scale. It does it with a strong culture that develops good managers and analysts, low costs that reduce the hurdle rate they need to produce good results, and sound strategies that make all that girth manageable.

Four of American's international funds have produced top-quartile results for the past three years, and there's a good excuse for the one that hasn't. American Funds New World NEWFX has lagged most emerging-markets funds because it takes a more conservative approach to emerging markets. In order to reduce volatility, the fund mixes developed-markets stocks of companies with major operations in emerging markets with bonds and stocks of emerging-market companies. As a result, the fund lags when emerging markets are soaring, as they did between 2003 and 2007, but it loses a lot less in years like 2008 when emerging markets get smacked.PAGEBREAK

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