As international markets have racked up red-hot returns over the past few years, more and more investors are beginning to look overseas for investment opportunities. Foreign mutual funds have seen unprecedented inflows, as investors jockey to latch onto some of the outsized gains this asset class has produced as of late. In the rush to get access to these international markets, some investors have no doubt skipped over the step of carefully examining their foreign mutual funds before committing their money.
Don't make this mistake. It's not enough just to pick a well-known international mutual fund out of a hat in order to get some quick foreign exposure. Take the time to choose a good fund with a solid management team and strong performance track record. In my opinion, these types of funds are a bit more rare in the international space. However, one fund that does fit the bill on all accounts is Thornburg International Value.
Meet the managers
The Thornburg International Value Fund (TGVAX) is managed by a team of three portfolio managers, Bill Freiss, Wendy Trevisani, and Lei Wang. Friess has been with the fund since its inception in mid-1998, with Trevisani and Wang having been promoted to co-manager roles in early 2006. All have a long history with the fund, making this a very seasoned management team. And Fools know that this is one of the first things to look for when choosing an appropriate mutual fund.
Thornburg employs a value-oriented approach to identify attractive foreign stocks. Analysts look across sectors and the capitalization spectrum, and also include emerging markets in their starting universe. Personally, I think this is one of the more attractive features of the fund. Having this type of "go-anywhere" mandate allows portfolio managers much more flexibility to seek out reasonably-priced securities. Right now, the fund is concentrated in the large-cap area, with only a small (4%) allocation to mid caps, but the small- and mid-cap allocation has been much higher in the past. The fund's current exposure to emerging markets stands at roughly 19%, which is a pretty hefty slug. Right now management is favoring positions in stocks such as Teva Pharmaceutical
Rosy performance
Thornburg's longer-term performance picture is quite good. Although the fund doesn't have a full 10 years of performance history yet, returns since its May 1998 inception have been quite good, as seen in the chart below:
|
Fund |
Cumulative Return Since Inception (5/28/1998) |
What a $10,000 Portfolio Would Be Worth Today |
|---|---|---|
|
Thornburg International Value (TGVAX) |
211% |
$31,098 |
|
MSCI EAFE Index* |
95% |
$19,501 |
*Morgan Stanley Capital International's Europe, Asia, and Far East index.
Furthermore, the fund has ranked in the top half of its peer group in every calendar year since its inception, and has landed in the top quartile ranking in almost all of those years. All in all, the fund has shown remarkable consistency, including posting an impressive 63% return in 1999, a year when value-oriented stocks were more out of favor with the market. Of course, when emerging markets suffer a downturn, as they did in 1998, this fund will likely get hit harder than its less-exposed peers. In the last half of 1998, the fund lost 9.1%, compared to the MSCI EAFE benchmark, which was up 4.2%.
A few disclaimers
There's not much about this fund that I can quibble with, although investors do need to be aware that the fund has a wider mandate than most of its peers, and therefore may prove to be riskier at times, if holdings in mid and small caps should rise. The same applies to the fund's emerging markets exposure, which can be a drag on performance should this area encounter difficulty. And as a final disclaimer, holdings do tend to be somewhat more concentrated in this fund, typically between 50 and 60 names. Obviously, while this offers a greater chance for the portfolio to be affected by a favorably performing stock, the reverse applies as well.
As long as investors keep these points in mind, I think Thornburg International Value would be a welcome addition to anyone's mutual fund portfolio. Keep in mind that international markets have done extremely well over the past four years, and that we may not see such tremendous returns from this area going forward. However, maintaining exposure to the foreign marketplace should be an important part of almost everyone's investment strategy, and this fund is an excellent choice to help investors do just that.
Related articles:
Interested in learning more about which mutual funds might be right for you? If so, the Fool's Champion Funds newsletter may be just what you've been looking for. Fool fund expert Shannon Zimmerman takes an in-depth look at some of the winners in the mutual fund universe. Start your free 30-day trial today.
Fool contributor Amanda Kish lives in Rochester, N.Y., and does not own shares of any of the companies or funds mentioned herein. The Fool has a disclosure policy.
