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Proven International Managers With Relatively New Funds

Sound and varied approaches from three experienced managers with new funds who are worth watching.

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This analyst blog is part of our coverage of the 2016 Morningstar Investment Conference. 

"If you don’t swim in shark-infested waters, you can’t get bitten by a shark," said Rupal Bhansali, lead manager of  Ariel International (AINIX). She used the imagery to express her conviction that avoiding risky companies, and risk management, more generally, is essential to achieving above-average long-term investment results. That's a view shared by her fellow panelists at the Morningstar Investment Conference: Andrew Foster, lead manager of  Seafarer Overseas Growth and Income (SIGIX); and Jonathan Bloom, one of nine comanagers of  FMI International (FMIJX).

The managers seek to mitigate risk in different ways. In overseeing her portfolio of roughly 65-75 large-cap international stocks, Bhansali looks for companies that are well positioned to have a competitive advantage in an evolving marketplace and then to buy them when they're misunderstood. Her value discipline provides a margin of safety that helps to preserve capital and enhance future returns. Bloom and his comanagers have a similar approach to investing in large-cap international firms. Where they differ is in running a more concentrated portfolio of 25-30 stocks and fully hedging their foreign currency exposure, whereas Bhansali keeps her fund's currency exposure in line with that of the MSCI All-Country World Ex-USA Index's. As a dividend-oriented, emerging-markets manager, Foster stands out the most. He looks for companies with growth trajectory that can survive and even thrive amid the periodic shocks that afflict developing economies. Besides helping him to value companies in disparate regions, dividends damp volatility a bit, and, more importantly, showcase a company's liquidity and solvency. While Foster does not hedge foreign currency exposure, he does use a currency risk model and tries to limit exposure to a single currency within his portfolio of about 35-40 stocks.

The three managers have yet to captain their current funds through a full market cycle. Indeed, FMI International's late 2010 inception date makes it the oldest of the three funds. Each of the managers, though, has delivered solid results with their current funds and has a proven track record elsewhere. Prior to joining Ariel in 2011, Bhansali was the sole portfolio manager of MainStay International Equity (MSIIX) for more than a decade. During her tenure, which included the 2007-09 credit crisis, that fund outperformed the MSCI EAFE Index by 1.9 annualized percentage points. Foster also had good risk-adjusted results in helping to lead  Matthews Asian Growth and Income (MACSX), which he comanaged from early 2005 through late March 2011. And Bloom is part of an accomplished FMI investment team headed by Patrick English. The firm uses the same approach with its domestic equity strategies,  FMI Large Cap (FMIHX) and  FMI Common Stock (FMIMX), both of which through May boast top-decile 10-year trailing returns relative to their respective large-blend and mid-cap blend Morningstar Categories. Among FMI's funds, however, only FMI International is open to new investors.

Success is not guaranteed for Bhansali, Foster, and Bloom and team in their current international investing endeavors. But their sound, if somewhat varied, approaches and past results make them managers worth watching.

Alec Lucas has a position in the following securities mentioned above: FMIMX, FMIHX, FMIJX. Find out about Morningstar’s editorial policies.