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By Christine Benz and Russel Kinnel | 07-15-2013 02:00 PM

Newly Issued Ratings for 3 Foreign Funds

A big price tag keeps one fund in Neutral territory despite its pedigree, while two small-cap funds get Silver ratings.

Christine Benz: Hi. I'm Christine Benz for Morningstar.com.

Morningstar's analysts have issued new ratings on three international funds. Joining me to discuss them is Russ Kinnel, director of fund research for Morningstar.

Russ, thank you so much for being here.

Russ Kinnel: Good to be here.

Benz: Russ, let's start with Longleaf Partners Global. This is a fund from a family that we like to some extent, especially for their domestic-stock fund Longleaf Partners. Let's talk about why this one just rates a Neutral right out of the box.

Kinnel: It's got a great pedigree in Mason Hawkins and Staley Cates, and they're investing the Longleaf way, and they are borrowing from foreign and domestic ideas. So all of that's great, but the fund is charging 1.65% in expenses, which is way above what you pay for the international or domestic funds. So there are some good ingredients here, but at that fee level, it's a lot less attractive.

Benz: So, you think for someone who wants to tap into Longleaf's abilities--and we do think it's a good firm from the standpoint of people and parent and process--you think you're better off maybe buying the international fund, buying Longleaf Partners, and then adjusting your own allocations accordingly?

Kinnel: That's right. This fund is actually not going to be exactly the same as those other two funds, but it's borrowing the stocks from those same portfolios, and it's not going to shift the allocation very much. So, you're much better off, I think, buying those funds directly. We think the underlying funds are good. Obviously, domestically they've had some challenges, performance has slacked off a little lately, but it still has good long-term performance. But I don't see why you'd want to pay 1.65% versus the lower fees you'd pay for other two funds.

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