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Why Does Artisan Have Three Separate Global-Stock Funds?

This trio is worth a closer look.

Gregg Wolper, 09/11/2012

The Artisan fund family offers only 12 mutual funds. Interestingly, three of them are global-equity funds, meaning the portfolios contain stocks from around the world, including the United States. What might appear as redundancy, though, is actually variety. The three funds--Artisan Global Equity ARTHX, Artisan Global Opportunities ARTRX, and Artisan Global Value ARTGX--are run by three different teams using strategies that are quite distinct from one another.

With that in mind, it's surprising that two of these funds are at the very top of the category so far this year, and the other also lands in the top third. More typically, when one approach is in favor, different styles can struggle. So, what's going on here?

Artisan's business model explains why the funds follow markedly different strategies. The firm has distinct investment teams, often in different locations, and leaves them alone to manage in their own way. Below, we look at each one in more depth.

Artisan Global Equity ARTHX
Artisan Global Equity, which came out in March 2010, is run by lead manager Barry Dargan along with Mark Yockey. Although the fund is young, the managers have plenty of experience. Before joining Artisan, Dargan ran MFS International Growth MGRAX, racking up a strong record from 2001 to 2010. Meanwhile, Yockey has been managing the successful Artisan International ARTIX and Artisan International Small Cap ARTJX offerings since their inceptions in 1995 and 2001, respectively.

Artisan Global Equity's portfolio lands in the large-growth section of the Morningstar Style Box, which is no surprise. Dargan's MFS fund landed there throughout his tenure, and Yockey's funds have bounced between the large-blend and large-growth boxes. (They're currently in the latter area.) What's most noticeable is a decided sector tilt. In the most recent portfolio, Dargan and Yockey are heavily overweighting consumer-defensive stocks, with 28% of assets in that sector versus 12% for the MSCI World Index. Conversely, they have an underweighting in the technology sector (8% of assets versus 15% in the index).

The fund is enjoying a tremendous 2012 so far. It has gained 22.8% through Sept. 7, the second-best showing in the world-stock category. This result illustrates how it can sometimes be misleading to explain performance by citing sector-based factors, for in general, technology and consumer-defensive names have neither strongly outperformed nor lagged this year. Rather, the fund's showing owes to the sharp climbs of a number of individual choices, including well-known holdings such as Nestle and Walt Disney DIS as well as a few more-unusual companies such as Japanese food maker Calbee. The fund has also had very few losers this year.

Although the fund also outperformed, to a lesser extent, in its first calendar year of 2011, investors have yet to notice. It has just $14 million in assets.

Artisan Global Opportunities ARTRX
Artisan Global Opportunities, launched in September 2008, isn't the youngest of the three Artisan global funds, at least on the surface. But its history as an avowedly global fund is brief. Only in January 2011 did it replace its U.S.-focused benchmark with the globally oriented MSCI All Country World Index, and not until May 2012 did the former Artisan Growth Opportunities change its name to reflect its growing tilt toward foreign stocks in the portfolio.

As with the above-mentioned offering, though, this one's managers--James Hamel, Andrew Stephens, Matthew Kamm, and Jason White--have established an impressive, long-term record elsewhere. Stephens has managed Artisan Mid Cap ARTMX since its 1997 inception, with Hamel being named comanager in 2006 and the others joining later. That fund has top marks in all trailing periods.

And their global fund, which has about $285 million in assets, sports an interesting makeup. Although it has a growth bent, like Artisan Global Equity, its portfolio is in some ways the complete reverse of Yockey and Dargan's offering. This portfolio, which lands even further to the right in deep-growth territory than Artisan Global Equity, has a 34% stake in technology (the index weighting is 15%), and the managers aren't impressed by the consumer-defensive names that receive more than one fourth of Global Equity's assets: This fund has just 4% of assets there.

Despite that vast difference in sector weightings, Artisan Global Opportunities
has nearly the same 2012 ranking as Yockey and Dargan's fund. With a 25.6% gain, it tops the category. Global Opportunities likely benefited from the fact that it still has more of a U.S. tilt than most global-equity funds, for the U.S. market has outperformed most major foreign markets this year. But individual choices mattered as well, with lesser-known names such as Regeneron Pharmaceuticals REGN (of the U.S.) and Hexagon (based in Sweden) soaring along with more-common fare such as top holdings Apple AAPL and Google GOOG.

Artisan Global Value ARTGX
Artisan Global Value is also run by topnotch managers who have demonstrated their abilities on another fund. David Samra and Daniel O'Keefe have established a solid reputation on Artisan International Value ARTKX, which Samra has run since its 2002 inception (O'Keefe was an analyst on the fund until being named comanager in 2006). Their Global Value fund opened in December 2007 and has outperformed consistently since then.

With growth generally topping value in 2012--an advantage for the prior two funds--one might expect this fund to be having a tough time. As its name implies, Artisan Global Value uses a very different strategy than either of its globally focused siblings. These managers are much more concerned with valuation. But they also go where the opportunities lie, and the fund's portfolio typically lands in the blend portion of the style box. Although it hasn't matched the powerful gains of its siblings this year, it has nothing to apologize for: It has posted a 13.8% return, beating more than 70% of its world-stock peers. It hasn't had big winners, but a remarkable amount of its picks have risen about 15% or 20% this year, and very few are in the red.

This fund does have one thing very much in common with its siblings: It hasn't attracted much attention. Artisan Global Value has $200 million in assets, a far cry from the $6.2 billion in Samra and O'Keefe's Artisan International Value.

Three to Watch
It's not necessarily a good idea for fund companies to have multiple funds in the same category. Often that practice can lead to redundant strategies, mediocre performance, and confusion for investors. This trio hasn't fallen prey to the first two dangers, but it's true that investors must do some work to understand the distinctions between the three; their labels don't make the differences clear. That said, the excellent long-term records of their managers on other, bigger funds, much more than their year-to-date success, make this group worth a look.

Gregg Wolper is an editorial director and senior mutual-fund analyst at Morningstar.
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