Jeremy Glaser: International-stock funds have had a good run in 2017, but as Christine Benz pointed out in her quarterly wrap-up, this brief period of outperformance is unlikely to mean that most investors are suddenly overexposed to non-U.S. equities. Investors do need realistic expectations, but it might make sense to consider adding to foreign positions today. Here are three of Morningstar's favorite international-equity funds.
Alec Lucas: Gold-rated American Funds Europacific Growth is easily the largest foreign-stock fund by total assets, but it's smaller than it looks. In line with American Funds' multimanager system, which splits the asset base into individually managed portfolios, this fund has nine named managers and two different analyst teams, and they manage sleeve sizes ranging in assets from $7 billion to $13 billion, with about $23 billion combined for the two analyst teams.
The fund's opportunity set includes companies domiciled in Europe, Asia, and the Pacific Basin, and its managers are free to invest according to their own styles and to wait for compelling investment opportunities and let cash build up if they need to. The fund has a consistent track record. It's been in the foreign large-blend category in the past, but it's been in the foreign large-growth since late 2014.
No matter its peer group, it's had consistent outperformance. It's, over the past decade, finished in the peer group's top half in eight out of the last 10 years, and in the top third in six of those years. With low fees and skilled managers, it's a great option for the next decade as well.
Dan Sotiroff: Gold-rated Vanguard Total International Stock Index is a wonderful fund for investors seeking exposure to foreign markets outside of the U.S. This fund tracks the FTSE Global All Cap Index. It holds stocks from companies in both developed and emerging markets across large, mid-, and small capitalizations.
This fund holds almost 6,000 different stocks, with about 8% of assets represented by the top 10 holdings. It has about 15% of its assets located in emerging markets, which is more than a typical fund in the foreign large-blend Morningstar Category. However, this accurately represents the foreign ex-U.S. marketplace.
Investors should be aware that investment in foreign stocks carries an additional layer of risks due to fluctuations in currency risk. Like many of its peers, this fund does not hedge its currency risk out.
Vanguard offers this fund in three different formats. Both Admiral shares and the ETF form are available at an expense ratio of 12 basis points, while investor shares are available at 18 basis points. All of these expense ratios are among the lowest in the foreign large-blend Morningstar Category.
Greg Carlson: Oakmark International is a fund we have a lot of confidence in. The lead manager, David Herro, has run it for 25 years, since its inception. He lost an experienced comanager last year. However, the new comanager has worked with him on another fund for six years and is a longtime veteran of the firm.
They practice a highly disciplined, valuation-focused approach. They're not afraid to veer very sharply from their benchmark's weightings. The fund has generated an excellent record over the long term. Its fees are merely average, but we have a lot of confidence in the people and the process. It earns a Gold Morningstar Analyst Rating.