Two Fine Foreign Funds for Wary Travelers
These lesser-known offerings combine limited risks with low costs.
Fund Spy
Investors are beginning to show more interest in foreign-stock funds. It's not hard to figure out why. The typical foreign offering has jumped 23% since mid-March, seven percentage points more than the resurgent S&P 500 Index. And the abundance of terrific bargains abroad and the fact that the dollar's weakness looks more than temporary has many hoping that the recent outperformance of overseas offerings will last.
Nonetheless, it's clear from the feedback we're getting that some investors remain quite dubious about foreign funds. There are three main reasons for this skepticism. First, on an annualized basis over the past decade, the typical overseas offering has gained four percentage points less per year than the average diversified domestic-stock fund and five percentage points less per year than the S&P 500. Second, foreign-stock funds face more risks than their domestic counterparts. Third, the offerings, which have an average expense ratio of 1.72%, are quite pricey.
Only time will tell if the past decade was an aberration, but it's worth pointing out that international exchanges regularly outpaced the U.S. market in the 1970s and 1980s, and most research shows that adding some foreign exposure reduces the volatility of a pure-domestic portfolio.
Meanwhile, investors who are leery of overseas offerings should note that there are a number of relatively strong-performing foreign funds with modest volatility and moderate costs. Some, such as Analyst Picks American Funds EuroPacifc Growth (AEPGX) and Tweedy Browne Global Value (TBGVX), are quite well known, but two others deserve more attention from nervous travelers.
Sentinel International Equity (SWRLX)
It's a mystery why this fund, which has attracted just $73 million in assets, is flying under investors' radar screens. Manager Erik Granade has been at the helm for nine years and the fund has handily outpaced the average foreign offering during his tenure, by thriving in rough conditions and prospering in moderate rallies. Moreover, largely because Granade's value discipline limits price risk, the fund has been much less volatile than its typical peer—and the S&P 500 Index—over time. And its 1.30% expense ratio is 36 basis point lower than that of the typical front-load foreign offering and about the same as average front-load domestic large-cap offering.
Evergreen International Equity
Individual investors, who have less than $300 million in this fund's three retail share classes, should take a hint from pension plans and other big investors, who have nearly $900 million in the institutional share class of this offering. Gilman Gunn, who has been running this fund's oldest share class (the B share class) for more than a decade, has earned strong long-term relative returns with modest volatility by following a valuation- and risk-conscious growth strategy. And the 1.12% expense ratio of the A share class is quite attractive by any standard.
Nonetheless, it's clear from the feedback we're getting that some investors remain quite dubious about foreign funds. There are three main reasons for this skepticism. First, on an annualized basis over the past decade, the typical overseas offering has gained four percentage points less per year than the average diversified domestic-stock fund and five percentage points less per year than the S&P 500. Second, foreign-stock funds face more risks than their domestic counterparts. Third, the offerings, which have an average expense ratio of 1.72%, are quite pricey.
Only time will tell if the past decade was an aberration, but it's worth pointing out that international exchanges regularly outpaced the U.S. market in the 1970s and 1980s, and most research shows that adding some foreign exposure reduces the volatility of a pure-domestic portfolio.
Meanwhile, investors who are leery of overseas offerings should note that there are a number of relatively strong-performing foreign funds with modest volatility and moderate costs. Some, such as Analyst Picks American Funds EuroPacifc Growth (AEPGX) and Tweedy Browne Global Value (TBGVX), are quite well known, but two others deserve more attention from nervous travelers.
Sentinel International Equity (SWRLX)
It's a mystery why this fund, which has attracted just $73 million in assets, is flying under investors' radar screens. Manager Erik Granade has been at the helm for nine years and the fund has handily outpaced the average foreign offering during his tenure, by thriving in rough conditions and prospering in moderate rallies. Moreover, largely because Granade's value discipline limits price risk, the fund has been much less volatile than its typical peer—and the S&P 500 Index—over time. And its 1.30% expense ratio is 36 basis point lower than that of the typical front-load foreign offering and about the same as average front-load domestic large-cap offering.
Evergreen International Equity
Individual investors, who have less than $300 million in this fund's three retail share classes, should take a hint from pension plans and other big investors, who have nearly $900 million in the institutional share class of this offering. Gilman Gunn, who has been running this fund's oldest share class (the B share class) for more than a decade, has earned strong long-term relative returns with modest volatility by following a valuation- and risk-conscious growth strategy. And the 1.12% expense ratio of the A share class is quite attractive by any standard.