Most investors buy mutual funds because they don't want to pick individual stocks themselves; they want to own a representative sample of stocks in a specific sector without having to buy them one by one; or they want to benefit from a skilled manager with a proven track record of managing other people's money.

International investors have another reason: Sometimes it is difficult or impossible to buy the foreign stocks you want to own on U.S. exchanges. Instead of jumping through hoops to open brokerage accounts around the world, you can let an international fund manager do the work for you. Here are two examples from my portfolio.

During the last five years, the T. Rowe Price Emerging Europe and Mediterranean Fund (TREMX) has been one of the hottest funds you never heard of. The numbers alone are enticing; a 33% gain in 2006 follows a three-year annualized return near 43% and a five-year annualized return just under 38%. That last number has beaten the MSCI EAFE index by a whopping 23% per year since 2002.

I first noticed the Emerging Europe and Mediterranean Fund in mid-2005, when it came up on a screen of top international funds. But it wasn't just the performance that pulled me in; most of the fund's top holdings are pretty much impossible to buy with a U.S. brokerage account:

  • Lukoil
  • MMC Norilsk Nickel
  • MobiNil
  • Novatek OAO
  • OAO Gazprom
  • Orascom Telecom
  • RBC Information Systems
  • Sberbank RF
  • Seventh Continent
  • Turkiye Garanti Bankasi

Source: T. Rowe Price, as of 11/30/06

You can buy Lukoil, Norilsk, and Gazprom very easily in the U.S., but the rest are hard to get without a determined trading desk to help you out. I tried to buy RBC Info Systems a few times and gave up in frustration. The Emerging Europe and Mediterranean Fund was the perfect way to get around that hurdle.

While 52% of the fund invests in Russian stocks, the sector diversification is broad:

Financials

 30.7%

Energy

27.5%

Consumer Staples

11.3%

Telecommunication Services

7.8%

Materials

6.7%

Information Technology

5.2%

Health Care

3.3%

Consumer Discretionary

 3.0%

Industrials and Business Services

2.4%
Source: T. Rowe Price, as of 11/30/06

If you build your international portfolio geographically, the Emerging Europe and Mediterranean Fund is also one of the few ways to cover the tumultuous swath from northern Africa through the Middle East and up into Russia. You may not want to have your money in such a volatile region, but the constant influx of oil money and hot growth in cities like Dubai make it worthwhile for me. This is an important segment in the emerging market to own, despite the inevitable ups and downs.

Another solid performer has been the Alpine International Real Estate Fund (EGLRX). Two of its top 10 holdings are listed on the NYSE: Orient Express Hotels (NYSE:OEH) and Starwood Hotels (NYSE:HOT). To buy the rest directly, you would have to fan out over the globe to Scandinavia, Southeast Asia, and beyond. Let's face it; none of us have a firm understanding of the Finnish commercial property market. But that is not a reason to miss out on gains there, when you can turn to a fund like Alpine International Real Estate and let them reach out for you.

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Fool contributor Dale Baker, a private client portfolio manager and former U.S. diplomat with extensive experience in Europe and Africa, owns shares in TREMX and EGLRX for himself and EGLRX for his clients. He welcomes your questions or comments. Fool rules are here.