This year's quintet has distinguished itself in tough conditions.
December has rolled around again, and it's time for us to select the Morningstar Managers of the Year for 2011. We revealed the finalists for Fixed-Income Manager of the Year on Monday, Dec. 12, and we'll announce the nominees for the Domestic-Stock Manager of the Year on Thursday, Dec. 15. Today, we'll name the contenders for International-Stock Manager of the Year.
2011 has been rough on managers who focus on equities abroad, as a rash of macroeconomic problems has left nearly all foreign stock markets well in the red for the year to date through Dec. 8. Foreign large-cap funds and foreign smaller-cap funds have fallen 12% to 15% on average, primarily because of Europe's debt crises and related woes. Diversified and regional emerging-markets funds have lost 18% to 24% on average because of worries that economic weakness in the developed world could undermine their growth. Concerns about inflation in China and India have also weighed heavily on these markets.
As is normally the case in sharp sell-offs, some international-stock managers have managed to limit losses, resulting in exceptional relative returns. However, while these are Manager of the Year awards, we require much more than superior results in the current calendar year. We also demand that the finalists exhibit terrific stock-picking skills, appealing disciplines, and strong long-term records.
With that background, here are the five nominees for the Morningstar International-Stock Manager of the Year 2011.
David Samra, Dan O'Keefe--Artisan International Value
David Samra and Dan O'Keefe have continued to shine since winning the award in 2008 for their prior success at Artisan International Value (which is now closed to new investors). They've guided that foreign large-blend offering to a top-decile result for the year to date through Dec. 8, for example, and they've also led their younger world-stock offering past the vast majority of its rivals thus far in 2011. Both of their funds boast exceptional long-term records as a result. Artisan International Value has posted a 14% annualized return since opening in September 2002, which is the top result in the foreign large-blend category and which would be tied for first in the foreign small/mid group. (This fund moved to the foreign large-blend category from the foreign small-mid value group a few years ago.) And Artisan Global Value has earned a 1% annualized gain and outpaced more than 95% of its rivals since opening in December 2007.
There's a distinctive strategy behind these distinguished results. Samra and O'Keefe favor companies that are selling well below their estimates of intrinsic value, consider companies of all sizes, and let country and sector weightings fall where they may. They typically own just 40 to 50 names. Thus, both funds consistently stand out from their category peers and have what it takes to continue to outperform. And the fact that both managers have more than $1 million invested in each fund is another plus. (Please note that both funds are expected to make small distributions later this year.)
Jim LaTorre, Ted Wendell, Howard Appleby, Jean-Francois Ducrest--Harbor International
Jim LaTorre, Ted Wendell, Howard Appleby, and Jean-Francois Ducrest of Northern Cross, who have been key players on this fund for 10 years or more, are quite selective and patient in their approach. They're set on attractively priced blue chips with catalysts that should lead to significant competitive advantages or pricing power over time. They pay ample attention to emerging-markets names and readily load up on opportunities in individual sectors. And they invest for the long haul: Annual turnover is usually below 20% here.
The merits of this strategy, as well as management's skill, are evident in this fund's year-to-date and long-term records. This fund has lost less than 85% of its foreign large-blend rivals in 2011's tough conditions. More important, it has posted impressive results in all kinds of climates in the past and sports top decile three-, five-, 10-, and 15-year returns. LaTorre, Wendell, Appleby, and Ducrest--who won the award in 2007 along with former lead manager Hakan Castegren and who each have more than $1 million invested in this fund--have made a good case for themselves in 2011. (Please note that this fund is expected to make a small distribution later this year.)