A Concentrated Foreign Large-Growth Fund on Our Radar

Wiley Green: Franklin International Growth is on our radar thanks to a differentiated investment process and experienced management team. This foreign large-growth fund is concentrated, with a target of 40 unique holdings. Instead of explicitly diversifying the fund's holdings based on sector, this fund's managers limit risk by carefully analyzing economic overlap among holdings.

Economic overlap can be a product of the stock's region, or sector, or both. Essentially, the managers seek to own companies whose earnings are not correlated. Consider a simple hypothetical example where two stocks are purchased: one share of a beverage company and another of a recycling company. The two stocks, which might reside in the consumer staples and industrials sectors, respectively, could have correlated earnings streams. If consumer demand for canned beverages decreases, recycling volume could also slide. This approach requires a light set of portfolio restrictions as the managers roam the globe in search of good ideas. The resulting portfolio's sector weights, regional exposure, and average market cap can deviate substantially from the benchmark.

The team behind this fund has remained intact since the fund's 2008 inception, and the managers are all invested in the strategy alongside fundholders. Despite average fees, the fund's intriguing process and stable team keep this foreign large-growth strategy on our radar.