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Oakmark International Reopens Amid Opportunities, Outflows

Manageable outflows and the departure of comanager Rob Taylor shouldn’t stop investors from taking a closer look at International and two other recently fully reopened funds from Oakmark.

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Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. Oakmark recently reopened Oakmark International and two other funds. I'm here with Greg Carlson, he's a senior analyst on our manager research team, for a closer look at this news. Greg, thanks for joining me.

Greg Carlson: Absolutely, Jeremy. Thanks for having me.

Glaser: So let's start with what actually happened. Now these funds were never fully closed but they have really swung open the doors to three funds here.

Carlson: Correct. Oakmark International, Oakmark International Small Cap, and Oakmark Global were all closed but not to all new investors. They were closed to intermediaries. They were still open to direct new investors as well as new investors in retirement plans. So what they've done now is reopened all the funds to all new investors.

Glaser: So what is driving this? Has it been outflows, they just feel like they have more capacity?

Carlson: Partly outflows and partly they feel as a result of the decline in security prices, particularly overseas, they have more opportunities.

Glaser: They also announced that Rob Taylor, who is a comanager on two of these funds, is departing. Do you think that's just a coincidence with this timing? What's happening here?

Carlson: I think it's a coincidence, really. Taylor has comanaged Global since 2005 and International since 2008. It's a significant loss. He's been at the firm since 1994.

Glaser: So with his departure, does it make you potentially think twice about the investment case behind some of these funds?

Carlson: Not especially. David Herro remains the lead manager on Oakmark International. He's run that fund since its 1992 inception. He's also run International Small Cap since its 1995 inception. And he is going to take over for Taylor at Global.

Glaser: Now I know these are three very different strategies, but do you think that there is now an opportunity? Is this reopening something that investors should be looking at?

Carlson: I think so. Herro is a very accomplished manager and Oakmark in general has done a fantastic job over the long term.

Glaser: And how would you use these different funds? Are they more core holdings? Are they satellite? What would be the right way to think about that?

Carlson: It varies. International is definitely a core holding, fairly diversified, invests heavily in liquid large caps. Global is a little more concentrated. Currently has 36 stocks. It can be a little volatile, so maybe not a complete core holding. Maybe more of a supporting player. And similarly, International Small Cap, although it's not particularly concentrated, it does focus on small-cap stocks.

Glaser: You mentioned there have been some of outflows from the fund. There has been some shaky performance recently. When you think about those outflows, do you think that will impact future performance? Is that something they're able to manage?

Carlson: No, I don't think outflows represent a significant threat, at least at their current pace. They've been fairly moderate thus far.

Glaser: Great. Thanks for the update on Oakmark today.

Carlson: Absolutely. Thanks for having me, Jeremy.

Glaser: For Morningstar, I'm Jeremy Glaser. Thanks for watching.

Greg Carlson has a position in the following securities mentioned above: OAKIX. Find out about Morningstar’s editorial policies.