4 Great Global Funds
Consider these funds if you can invest in them through a 401(k) or adviser so you can avoid the sales charge.
In some ways, global markets are starting to feel like they did in the first half of 2008. The dollar is sagging, oil and other commodity prices are climbing (in terms of the U.S. dollar), and gold prices are spiking into uncharted territory. Add to the mix the enormous challenges facing the U.S. economy and the better growth prospects in many foreign countries, and it’s not hard to see why investors should consider boosting their exposure to overseas markets.
One way to achieve this is by investing in global stock funds, which have the advantage of comparing and contrasting domestic and foreign companies and picking the best values. Below, we describe four superb global funds, all of which are normally sold by brokers and other third parties and charge commissions.
We don’t suggest that you pay a load to invest in these funds, but we do urge you to take a close look at them if they are available without sales charges in your 401(k) or 529 plans. And if you work with an adviser who can offer you load funds without their sales charges, ask him or her to consider one of these funds for your portfolio. (We provide symbols for the funds’ Class A shares, which levy front-end sales charges ranging from 5.0 to 5.75%.)
Franklin Mutual Global Discovery (symbol TEDIX) is a deep-value fund run by Charles Lahr and Anne Gudefin. “We’re looking for an asset selling for 60 cents that’s worth a dollar,” says Lahr. Discovery currently finds better value in Europe than in the U.S., so the fund holds British American Tobacco (BTI) and Pernod Ricard, the French beverage giant. Discovery also invests in merger arbitrage deals and distressed debt when it spies value in those markets, something it is doing today. Over the past five years through October 21, the fund returned an annualized 9.1%, an average of five percentage points per year better than the MSCI World Index.
Charles de Vaulx and Chuck de Lardemelle, co-managers of IVA Worldwide (IVWAX), are also deep-value managers with a fine pedigree. Both worked under the legendary Jean-Marie Eveillard, who steered First Eagle Global for three decades with astonishingly good results (de Vaulx ran or co-managed Global for seven years before departing in 2007).
IVA is more eclectic than Discovery and will consider any asset class that can produce stock-like returns. For instance, 23% of the fund was in high-yield debt at last report and 6% in gold bullion. De Vaulx finds more value in Europe and Japan than in the U.S. these days, so less than one-third of the stock portfolio is in domestic stocks. Launched on October 1, 2008, IVA Worldwide got off to a fine start, returning 32.6% over the past year, ten percentage points ahead of the MSCI World Index.
Ivy Asset Strategy (WASAX) is a different animal. Managers Mike Avery and Ryan Caldwell first develop an overview of the global economy and markets. Then, unlike bargain-hunting investors such as de Vaulx and Gudefin, they buy into fast-growing, high-valuation companies. For several years, their big theme has been to cash in on the emerging middle class in developing countries, such as China and India. Ivy has 14% of assets in gold, a relatively high allocation. Avery notes that central bankers in the U.S. and elsewhere are printing money and degrading their currencies. This fund has been a superb performer, returning 15.7% annualized over the past five years. That beat the MSCI World Index by nearly 12 points a year.
Howard Ward, who has run Gamco Global Growth (GGGAX) with Caesar Bryan since May 2005, is also a bear on the dollar. “The policy track in Washington is anti-dollar, whether it’s fiscal or monetary policy,” he says. But Gamco’s approach is to address perceived dollar weakness through stocks instead of gold bullion or currencies. One-third of the fund’s holdings are in materials and energy stocks, which benefit from dollar weakness even if they’re U.S.-based companies because commodities are priced in U.S. dollars. Ward likes gold miners, such as Agnico-Eagle Mines (AEM). “We have trouble finding a country that wants a strong currency,” he says. Over the past four years, Gamco Global returned 3.2% annualized, beating the MSCI World Index by 3.3 points per year.
If you want to buy a global stock fund directly without a load, consider Marsico Global (MGLBX), a member of the Kiplinger 25. Also worth a look is Dodge & Cox Global Stock (DODWX; see Dodge & Cox Goes Global).