Front-Runners for International Manager of the Year

For dogged fund investors who held on to their foreign funds, it’s been a long winter. The typical foreign fund hasn’t earned a positive return since 1999. On average, foreign funds lost 4 percentage points more than the typical large-blend fund, but this year they're up more than 11%. Leading the way are small- and mid-cap funds, particularly those that shop in Asia.

To come up with a list of leading candidates for our International Fund Manager of the Year, I screened for funds with top-quartile year-to-date and five-year returns. Besides strong returns, we look for shareholder-oriented managers who stick to their guns regardless of fashion. Here then are a few of the better candidates.

George Greig,  William Blair International Growth (WBIGX)
Greig is a flexible manager who will go just about anywhere for growth. He looks at all markets and all market caps. Currently, the fund is riding a play on growth in Asia to 13% gains for the year. More impressive is his five-year record, which ranks in the top 5% of foreign-stock funds'.

Frank Jennings,  Oppenheimer Global Growth & Income (OPGIX)
Frank Jennings is the boldest manager on this list. He seeks to maximize returns without much regard for sector or regional weights, and if he can’t find enough good stocks, he’ll move into bonds. Last year Jennings made a savvy move into tech that hurt returns in 2002 but helped the fund to a big 19% gain for the year to date. Since Jennings took over in 1995, the fund has whipped both the average world-stock fund and its index.

G. Staley Cates, O. Mason Hawkins, and Eugene Andrew McDermott,  Longleaf Partners International (LLINX)
This fund hasn’t hit its five-year mark yet, but it will by year-end. Once it does, it will have a truly impressive record. Since inception, the fund has gained 77% through the end of June compared with a 4% loss for the average foreign fund. The managers transplanted the same focused value approach they used for many years when bargain-shopping in the United States, and it has worked just as well in the rest of the world. They look for companies trading at a 40% discount to their estimates of intrinsic value. Unlike most foreign managers, they haven’t been shy about investing in Japan. They’ve got more than a third of assets in names such as Nippon Fire & Marine Insurance and Nippon Telegraph & Telephone.

Justin Thomson,  T. Rowe Price International Discovery (PRIDX)
This fund doesn't pop up very often, but it’s quite rewarding when it does. It’s up 23% this year and it gained 155% in 1999. In between, it lost 47% of its value. Thus, you’ve got to be incredibly patient to make this fund work. Thomson looks for fast-growing small caps and that’s a recipe for extreme volatility, but he has made it work.

David Herro and Michael Welsh,  Oakmark International Small Cap (OAKEX)
We’re staying in small cap, but now we’ve moved back to the value side. Herro and Welsh have the fifth-best three-year returns and second-best five-year returns in the foreign-stock category thanks to a well-executed strategy of buying depressed companies set for a rebound. The fund is closed to new investors.

Jeremy Hosking,  Vanguard Global Equity (VHGEX)
This year some savvy value investors have made a killing in tech and telecom. While some growth managers were wary after getting burned in the bubble, managers such as Jeremy Hosking stepped up when they found stocks that met their value discipline. Hosking, of Marathon Asset Management, lagged most of his peers during the 1990s growth rally, but he’s working on his fourth straight year of strong outperformance.

James Doyle, Harry Hartford, and Sarah H. Ketterer,  Causeway International Value (CIVVX)
You need a little paste to get a five-year record here. These managers have put up outstanding numbers since launching this fund in 2001, and before that they did great work at Mercury International Value (now Merrill Lynch International Value ). The strategy here is a straightforward all-cap value tack that the team has executed better than most other managers doing something similar.

Andrew Adelson,  Bernstein Tax-Managed International Value 
Adelson will retire at the end of the year and he’s going out in style. The fund boasts top-quartile returns for both the year-to-date and the trailing 10-year periods. On an aftertax basis it ranks even higher. Thanks largely to a focus on financially sound companies with well-below-average price multiples, the fund is the tamest of the lot on this page. Over time, that orientation has delivered a smooth ride and strong aftertax returns.