Two New World-Stock Funds That Play Global Well

Our affection for the world-stock category runs deeper.

Over the past few years, we've developed a renewed appreciation for world-stock funds and have highlighted in previous columns both existing and new offerings that earn our recommendation. Our warming to the group stems in part from the fact that some of our favorite portfolio managers are now running such offerings. But more generally we like the idea of a broader investment universe, particularly as companies and economies worldwide become more and more intertwined. In a nutshell, investing with a global mindset is smart because it's never clear in advance whether the best opportunities will lie inside the United States or elsewhere in the world.

That fluid state of opportunities is what forms the argument for more flexibility when it comes to portfolio management. Indeed, we've lately seen some changes to U.S.-focused funds' prospectuses, including some from Evergreen; Royce; and Tweedy, Browne, that allow for a higher percentage of assets in foreign stocks. Some that already have some flexibility, such as the Franklin Mutual Series group of funds, are bumping up against their foreign-stock limits. Several categories of funds, such as large-growth, financial, and technology, have seen big jumps in their foreign-stock stake over the past decade.

We don't mean to suggest that foreign stocks are providing better values today or that investors ought to consider adding to their international funds now. (In fact, given how well international markets have performed over the past several years, it makes sense to proceed carefully when it comes to overseas stocks.) But for the long haul, it makes sense to consider world-stock funds, particularly those offered by skilled investors that have a global research platform and an open mind when it comes to regional makeup.

We stand by our  Analyst Picks in the world-stock category as great ways for investors to take advantage of the global approach to investments. But we'd also like to highlight a couple of new world-stock funds that bear consideration.

Calamos Global Equity (CAGEX)
This newest offering from Calamos may currently be its most attractive. Its management team is the same as that on the firm's other funds and separate accounts, which encompass U.S.-focused, international, and global objectives, and most of its funds and accounts sport attractive longer-term performance records. And like its siblings, the fund uses the same growth-oriented, multidisciplined approach that homes in on cash-rich firms with high, but sustainable, growth rates. What sets this one apart from the rest of its family--other than its more-flexible global mandate--is that it's tiny: It currently has less than $50 million in assets.

Given Calamos' opportunistic approach--while it expects to invest at least 40% of assets in foreign securities, it's allowed to put 100% overseas, for example--we think this nimble asset base is a big plus. That's particularly true considering the firm's success with smaller and mid-cap stocks. Indeed, the latest portfolio stats on Calamos' Web site show a healthy slug of mid-cap names. Meanwhile, the fund can invest as much as 20% of assets in convertibles--and we'd expect it will take advantage of that flexibility, given its expertise in that area. As in small-cap markets, the convertibles area can be more easily traversed with a small asset base.

While we're intrigued by this fund, there are a couple of risks to note. Most importantly, its aggressive growth approach can get it into trouble in tough times. Consider its young, foreign large-growth sibling,  Calamos International Growth (CIGRX), which suffered as markets around the world sold off in the spring of 2006. Further, the fund's expense ratio is on the high side. That will come down if assets increase, as it has on Calamos International Growth and other Calamos funds, but until then, it puts the fund at a slight disadvantage to cheaper offerings.

Marsico Global (MGLBX)
The first attribute that jumps out here is actually its expense ratio. Marsico Capital Management has capped it at 0.75%, making it (and its six-month-old moderate-allocation sibling Marsico Flexible Capital ) the investment boutique's cheapest by a long shot. In fact, it's among the cheapest world-stock funds available today.

Of course, what gets us so excited about the small expense ratio is that what's behind the fund makes it a downright bargain. The fund's management team consists of Cory Gilchrist, Tom Marsico, and Jim Gendelman. Marsico, of  Marsico Focus (MFOCX) and  Marsico Growth (MGRIX) and at Janus before them, has the longest record of superior performance, but Gilchrist and Gendelman have shone during their seven-year tenures at Marsico Capital Management and as managers of  Marsico 21st Century (MXXIX) and  Marsico International Opportunities (MIOFX), respectively.

We also think the more-flexible global format of a world-stock offering makes perfect sense for Marsico Capital Management's approach. Its small corps of analysts has long covered both U.S. and international stocks to support the firm's other offerings. And the firm has a history as a more flexible growth shop, adding some traditional value names to its cache of growth stocks. Currently, the firm's U.S.-focused holdings have more in foreign stocks than they've ever had (roughly 15%).

Portfolio holdings for Marsico Global won't be available until September 2007, but we imagine a lot of overlap between this fund and the firm's other offerings, so it may not make sense to hold this one in addition to other Marsico offerings. That said, the firm clearly appreciates a tight portfolio concentrated in a smaller bunch of stocks, so this could turn out to be something of a best ideas portfolio. The expense-ratio waiver is up for reconsideration at the end of this year, but at this price, we're pounding the table for this one.