Morningstar Advisor - August/September 2011 - (Page 23)

American Beacon Intl. Equity AAIPX This broadly diversified foreign large-value fund employs four subadvisors who don’t explicitly seek yield, but it’s boasted a healthy payout for years. Its recent 2.43% 12-month yield is a reflection of the relatively attractive valuations of dividend payers, the fund’s well-below-average expense ratio, and the fact that non-U.S. firms often have solid yields. American Funds International Growth and Income IGAAX This is a young fund (it won’t hit its third birthday until October), but it boasts a fine pedigree. Its three managers are backed by the same huge team of analysts that have played a big role in the success of American’s other foreign- and world-stock funds, and one—Carl Kawaja—is a 20-year firm veteran. This fund aims for a pre-expense ratio yield of 3.5%—its 2.6% one-month and 12-month yields are net of its 0.93% expense ratio. its assets, even more than the category norm. It’s unlikely the fund will regularly sit at the bottom of the charts, but its first-half problems serve as a wake-up call to anyone who thought Thakore’s stellar 2009 and 2010 showings indicated a bulletproof strategy. Fidelity Advisor Global Capital Appreciation FGEAX In the world-stock category, the 99th percentile is home to an offering much smaller than the $5.1 billion Putnam Voyager. This fund has just $149 million in assets, but it comes from a prominent fund family. Fidelity Advisor Global Capital Appreciation has plunged 15.6% so far this year, while the category average is slightly positive. How could this fund be so far behind? At the end of April, the fund had 19% of its assets in India, compared with a category average of just 1%. According to MSCI, India’s market has performed worse (in most cases far worse) than nearly any other developed or emerging stock market this year. The USX China HPCHX The USX China Fund has returns that look like a typo. For the year to date, it has lost 48.4%. China’s market has floundered this year amid concerns about rising inflation and slowing growth. Even so, the China-region category average shows a much milder loss of just 6%. The USX China has less than $10 million in assets, but its 2011 performance is worth noting. The fund invests in very small Chinese stocks, and its collapse this year, after a disastrous 2010, highlights how an appealing story can turn into a heap of trouble. HighMark Intl. Opportunities HIOMX This foreign large-blend fund’s managers begin by establishing country allocations based on models that incorporate various momentum, value, and risk factors. They then select stocks based on similar models, favoring those that rank in the top 20% while striving to own a healthy number of names in each market. The result is one of the more diversified portfolios in the international-stock universe. This fund typically invests 15% to 20% of its assets in emerging-markets stocks, devotes a similar amount to smaller-cap stocks, and owns 250 to 350 names. The managers have executed this strategy well over the years, and this fund has earned good five-, 10-, and 15-year returns with relatively average volatility. Janus Overseas JAOSX Brent Lynn has guided this foreign large-growth fund to stellar returns since 2001, and this fund has posted a 7.5% annualized return on his watch. That result ranks second-best among foreign large-growth offerings and places in the top 5% among all foreign large-cap funds. Not surprisingly, Lynn has used a pretty adventurous strategy to produce those results. For starters, he readily considers midsize firms if they are growing fast and have the high returns on capital and other traits he seeks, so this fund’s average market cap is usually well below the foreign large-growth median. What’s more, he’s not the least bit shy about loading up on stocks in the developing world as long as they meet his criteria. Masters’ Select International MSILX This foreign-blend fund is really distinctive as well as rather diversified. Its advisor divides the portfolio pretty evenly among six managers whose strategies span the style and marketcap spectrums and that complement each other nicely. All of the managers search far and wide for stocks that meet their standards, and all of the managers have the courage of their convictions. And the advisor limits the managers to eight to 15 picks each. Thanks to all these factors, this fund is wider-ranging than nearly all other foreign large-cap offerings, The Making of Three Cellar-Dwellers The dismal performance of Fairholme Fund FAIRX so far this year has attracted much attention and prompted many shareholders to withdraw their money. But Fairholme isn’t the only fund enduring a painful 2011. Some others, listed below, haven’t drawn as much attention, but their position at or near the bottom of the first-half charts, and the depth of their underperformance, should pique the curiosity of industry observers, says Gregg Wolper, a senior mutual fund analyst with Morningstar. Putnam Voyager PVOYX This year’s first half has not been kind to this fund or manager Nick Thakore. Through June 17, Putnam Voyager is down 6.3% for 2011, lagging the category average by more than 6 percentage points and landing in the 99th percentile of the group. Among the culprits: a variety of stocks in the technology sector, where the fund has more than 30% of Four Solid, All-in-One Foreign Funds A good number of foreign large-cap funds pay significant attention to both emerging-markets stocks and smaller companies. Several of these exceptionally wide-ranging funds are topnotch offerings, according to senior fund analyst William Samuel Rocco: MorningstarAdvisor.com 23 http://www.MorningstarAdvisor.com

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2011

Morningstar Advisor - August/September 2011
Contents
Contributors
Letter From the Editor
Simplicity and Design Matter
Do You Use ETFs Strategically or Tactically?
The Institutional Way
How to Analyze an ETF
Eyeing ETFs’ Next Chapter
Small-Cap/Large-Cap Flip-Flop?
Four Picks for the Present
Investment Briefs
Morningstar Investment Conference
Pitfalls of Peer Groups
A REIT Recovery, With a Catch
Turning Fund Distribution on Its Head
Here Come ETF Managed Portfolios
Circle These Picks Amid the Crop of New ETFs
ETF Analyst Favorites
Beware, the Accidental Portfolio Manager
It’s the Destination, Not the Vehicle
New Growth, Rooted in Experience
Better Ways to Look at ETFs
How to Better Manage Your Clients’ Future(s)
More Bargain Than Bubble
Cheap, Local, and On a Roll
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
First-Quarter Assets Hit an All-Time High
You Say You Want a Revolution?

Morningstar Advisor - August/September 2011