5 Funds to Capture the World

02/02/2012 10:15 am EST

Focus: GLOBAL

Russel Kinnel

Editor, Morningstar FundInvestor

Regardless of the worrisome talk about a crumbling Europe or slowing China, there is significant opportunities in overseas markets, and all smart investors need to have a stake outside the US markets, writes Russel Kinnel of Morningstar FundInvestor.

World-stock funds are well suited to the times. With high correlations across markets and easy access to information about companies around the globe, it makes a ton of sense to unshackle funds and let them move across borders without limits.

Yet because world-stock funds don’t fit neatly into allocation buckets, many have been neglected by investors. My take is that there’s no need for false precision. Does it matter if your foreign equity weighting is 30% or 40%? I doubt it, especially when multinationals are doing business around the globe.

The good part of that is it makes world-stock funds extra compelling, as they have smaller asset bases than they would have if they were pure foreign or domestic vehicles. Two relatively new funds with seasoned managers top my list.

Artisan Global Value (ARTGX) is run by David Samra and Dan O’Keefe in a focused, deep-value style. They look for good companies with clean balance sheets. They argue that emerging-markets stocks are currently overpriced, so they instead gain their exposure to those markets through developed-markets stocks with significant operations in emerging markets.

PIMCO EqS Pathfinder (PTHDX) is another great value play. It’s run by Mutual Series veterans Anne Gudefin and Chuck Lahr. The pair still invests in the cautious style you’d expect from Mutual Series.

However, it does add in some tail-risk insurance strategies that PIMCO has pioneered. It won’t likely affect performance much, but it could lessen the losses in a meaningful way during the next bear market.

Other favorites include Oakmark Global Select (OAKWX) and Tweedy, Browne Worldwide High Dividend Yield (TBHDX).

The Oakmark fund is a mix of focused portfolios run by Bill Nygren and David Herro. The Tweedy fund is a little more dividend-focused than is Tweedy Global Value (TBGVX), and it does not hedge its currency exposure the way that Global Value does. I like Tweedy’s conservative, value-conscious approach in general and its dividend focus here in particular.

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