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Foreign Fund Insight: Bargain Hunting Abroad

Foreign Fund Insight: Bargain Hunting Abroad

Gabriel Presler, 10/24/2001

<SPAN class=CbTxt> <P><SPAN class=CbTxt>International travel used to be a luxury for the very rich--and so international investing.  </FONT></P> <P><SPAN class=CbTxt>But a boom in the mutual-fund industry over the last 10 years means that foreign companies are now available to investors of modest means. Of the 368 foreign-stock funds that Morningstar now covers, 325 have been introduced since 1990. And the asset class has certainly garnered attention; total assets in this category reached $186.8 billion at the end of September 2001, up from $11 billion at the end of 1991. </FONT></P> <P><SPAN class=CbTxt>But not all foreign-stock offerings are created equal. And frugal investors should beware of fund shops that slam investors with hefty expense ratios in exchange for their ticket abroad. </FONT></P> <P><SPAN class=CbTxt>Expense ratios have a number of components, the largest of which is generally management costs, which compensates the mutual-fund company's traders, analysts, and portfolio managers. Administrative and operating fees are also bundled into the expense ratio, and  they include all the petty details such as mailing costs, annual reports, and letters to shareholders. Despite their innocuous appearance (who pays attention to decimal points?) and their location at the very back of your 20-page shareholder report (which you're always about to read tomorrow), expenses matter because they affect your bottom line: These fees accrue daily and they're deducted from the fund's net assets. When it comes to investing abroad, fund shops often use higher brokerage fees, increased trading costs, and the expense inherent to international research to justify sky-high fees. The average foreign fund charges 1.68% in management, operating, and administrative fees, while the average large-cap domestic offering carries a 1.34% expense ratio. </FONT></P> <P><SPAN class=CbTxt>But bargain-hunting investors don't have to sacrifice top-flight returns, solid research teams, and strong managers for affordable funds. It's possible to buy funds with respectable records and expense ratios of less than 100 basis points. This time around, we're expanding our definition of "cheap," and finding funds with lower-than-average expenses and the best five-year records in their group. </FONT></P> <P><SPAN class=CbTxt>Obviously, low expenses don't come hand in hand with low volatility; many of these offerings have suffered heavy losses since global markets turned sour in 2000. Missing from this list are a few of the category's best-known offerings, including Janus Overseas <?XML:NAMESPACE PREFIX = MSTR /?><MSTR:SECURITY>JAOSX</MSTR:SECURITY>, Liberty Acorn International, and Scudder International. The Janus offering is still closed to new investors, despite its miserable recent performance and dwindling assets. The Liberty Acorn and Scudder shops have both introduced loads on their open share classes and only previous shareholders can buy the funds on a load-waived basis, so we've added them below. </FONT></P> <P> <TABLE cellSpacing="0" cellPadding="0" width=422 border="0" > <TD vAlign="bottom" align="left" bgColor="#999999" colSpan=6><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" ><B><FONT face="Trebuchet MS, Arial, Helvetica" color="#ffffff" size="-2" > No-Load Funds with the Best Five-Year Records </FONT></B></FONT></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=1> </TD> <TD><IMG height=5 src="http://im.morningstar.com/im/dot_clear.gif" width=153></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=51></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=56></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=51></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=56></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=56></TD> <TD vAlign="top" align="left" ></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>YTD<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>12-Month<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>3-Year<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>5-Year<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right> <P><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>Expense<BR>Ratio</B></FONT></P></TD> <TD colSpan=6><IMG height=5 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Fidelity Diversified Intl <MSTR:SECURITY>FDIVX</MSTR:SECURITY> </FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-20.42</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-22.24</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >7.95</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >8.64</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.12</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" height="1"4><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >UMB Scout WorldWide <MSTR:SECURITY>UMBWX</MSTR:SECURITY> </FONT></TD> <TD height="1"4><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-19.04</FONT></TD> <TD height="1"4><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-21.85</FONT></TD> <TD height="1"4><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.17</FONT></TD> <TD height="1"4><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >7.89</FONT></TD> <TD height="1"4><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >0.91</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >HSBC Investor Intl Eq <MSTR:SECURITY>RINEX</MSTR:SECURITY> </FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-26.44</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-31.68</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >5.82</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >5.69</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >0.91</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD vAlign="bottom" align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Harbor International <MSTR:SECURITY>HAINX</MSTR:SECURITY> </FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-20.49</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-20.09</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >3.45</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >5.23</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >0.92</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Sextant International <MSTR:SECURITY>SSIFX</MSTR:SECURITY></FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-26.68</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-36.55</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >6.06</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.75</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.16</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Mercury HW Intl Value I <MSTR:SECURITY>MIVIX</MSTR:SECURITY> </FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >19.53</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-16.05</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >5.43</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.29</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.02</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Glenmede International <MSTR:SECURITY>GTCIX</MSTR:SECURITY> </FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-20.92</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-18.97</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.48</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.18</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >0.11</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Fidelity Intl Growth & Inc <MSTR:SECURITY>FIGRX</MSTR:SECURITY> </FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-25.84</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-30.74</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.50</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.09</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.05</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD colSpan=6><IMG height=9 src="http://im.morningstar.com/im/422x9rule.gif" width=422></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=1></TD> <TD vAlign="bottom" colSpan=6><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>Data as of 9-30-01. </B></FONT></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=1></TD></TABLE></P> <P><SPAN class=CbTxt>For travelers who want some hand-holding, there are some cheap load funds available: </FONT></P> <P> <TABLE cellSpacing="0" cellPadding="0" width=422 border="0" > <TD vAlign="bottom" align="left" bgColor="#999999" colSpan=6><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" ><B><FONT face="Trebuchet MS, Arial, Helvetica" color="#ffffff" size="-2" > Load Funds with the Best Five-Year Records </FONT></B></FONT></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=1> </TD> <TD><IMG height=5 src="http://im.morningstar.com/im/dot_clear.gif" width=172></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=46></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=56></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=46></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=46></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=56></TD> <TD vAlign="top" align="left" ></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>YTD<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>12-Month<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>3-Year<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>5-Year<BR>Return<BR>( % )</B></FONT></TD> <TD vAlign="top" align=right> <P><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>Expense<BR>Ratio</B></FONT></P></TD> <TD colSpan=6><IMG height=5 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS" color=black size="-2" >Putnam Intl Growth A <MSTR:SECURITY>POVSX</MSTR:SECURITY></FONT></TD> <TD><FONT face="Trebuchet MS" color=black size="-2" >-25.98</FONT></TD> <TD><FONT face="Trebuchet MS" color=black size="-2" >-27.24</FONT></TD> <TD><FONT face="Trebuchet MS" color=black size="-2" >9.86</FONT></TD> <TD><FONT face="Trebuchet MS" color=black size="-2" >9.83</FONT></TD> <TD><FONT face="Trebuchet MS" color=black size="-2" >1.14</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >American Funds EuroPacific A <MSTR:SECURITY>AEPGX</MSTR:SECURITY> </FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-19.78</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-26.14</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >6.84</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >6.81</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >0.84</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Fidelity Canada <MSTR:SECURITY>FICDX</MSTR:SECURITY></FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-17.55</FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-22.84</FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >14.00</FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.49</FONT></TD> <TD vAlign="bottom" align=right><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.06</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD vAlign="bottom" align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Templeton Foreign A <MSTR:SECURITY>TEMFX</MSTR:SECURITY></FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-17.31</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-11.86</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >7.81</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.05</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >1.15</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Scudder Intl S <MSTR:SECURITY>SCINX</MSTR:SECURITY></FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-29.68</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-30.97</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >0.98</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >3.95</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >*1.12</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD align="left" ><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >Liberty Acorn Intl Z <MSTR:SECURITY>ACINX</MSTR:SECURITY></FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-30.11</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >-39.33</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >4.56</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >3.82</FONT></TD> <TD><FONT face="Trebuchet MS, Arial, Helvetica" color=black size="-2" >*1.05</FONT></TD> <TD colSpan=6><IMG height=3 src="http://im.morningstar.com/im/dot_clear.gif" width=422></TD> <TD colSpan=6><IMG height=9 src="http://im.morningstar.com/im/422x9rule.gif" width=422></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=1></TD> <TD vAlign="bottom" colSpan=6><FONT face="Trebuchet MS, Arial, Helvetica" color=#999999 size="-2" ><B>Data as of 9-30-01.<BR>*Closed share class. Other share classes available. </B></FONT></TD> <TD><IMG height="1" src="http://im.morningstar.com/im/dot_clear.gif" width=1></TD></TABLE></P> <P><SPAN class=CbTxt>There aren't as many impressive offerings in this group; load funds tend to be more expensive and like their no-load counterparts, many of them have suffered in recent years. </FONT></P> <P><SPAN class=CbTxt>These lists don't include the cheapest of the cheap: The category's limited index funds. That's because the index group's chosen benchmarks--generally the MSCI indices--have been easy to beat over the past five years, making it difficult for these passively managed offerings to squeeze into the top half of the category. Still, no article on cheap funds would be complete without a nod to the Vanguard funds, including index offerings Vanguard Total International Stock Index <MSTR:SECURITY>VGTSX</MSTR:SECURITY> and Vanguard Tax-Managed International <MSTR:SECURITY>VTMGX</MSTR:SECURITY>, which have generally posted strong absolute returns and which feature rock-bottom expense ratios. </FONT></P> <P><SPAN class=CbTxt><EM>Peter Di Teresa contributed to this article. </EM></FONT></P></FONT> /?> /?> /?> /?> /?> /?> /?> /?> /?> /?> /?>

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