International mutual funds

Length: 912 words

As we all know, international mutual funds have long been a powerful and attractive investment option offering by many mutual funds companies in the United States. International mutual funds may be comprised of the stocks and bonds of companies based outside the United States and of bonds issued by foreign governments. In this paper I’m going to address the following issues: – US investing in international mutual funds; – risks and benefits of international mutual funds; – liquidity in emerging markets; – policies for improving international investment management.

US Investing in International Mutual Funds Few investments are as widely appealing as mutual funds. Firstrade website gives the following account of US investing in international mutual fuds: “Investors interested in foreign-based stocks have a number of choices. One attractive route, which provides both ready-made diversification and professional management, is investing in a mutual fund. Such funds may have holdings from a variety of geographic areas or may confine themselves to stocks from a single country.

International funds limit their holdings to markets outside the U. S. , sometimes to a specific region such as the Pacific Rim or Europe. In comparison, global funds typically invest anywhere, including the U. S. Because global funds tend

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to have 15% to 40% of their assets in the U. S. , they are less sensitive to swings in the foreign exchange rate. ” In recent decades, the US investment in mutual funds in general and international mutual funds in particular, has risen significantly.

According to IMF observations, as presented in Ito’s International Capital Markets: Developments, Prospects, and Key Policy Issues, “…growth has been especially marked in mutual funds. U. S. mutual fund assets have risen at double-digit growth rates since 1970 when they amounted to just $48 billion. 2 By the mid-1980s mutual fund assets had reached $495 billion, and by April 1997 they totaled $3,729 billion…First, in an increasingly global financial market, the importance of geographic presence has lessened, and thus fund management companies have responded to competitive pressures by consolidating their operations geographically.

Global asset management companies are increasingly consolidating operations in one center, such as San Francisco [and] Boston…” Train refers to the State Street Bank of Boston as to, “the leading custodian of international mutual funds. ” Certain geographic centres of international mutual funds investment are present inside the US, as well as outside the country. We may conclude that the global nature of contemporary financial environment makes investing in international mutual funds easier and safer, and this trend is likely to continue.

Still legislative and regulatory improvements that enhancing both the competitiveness of U. S. money management firms abroad and the level of service to investors in foreign markets, is necessary. I would like to analyse the chart presenting the statistics concerning the most recent operations of US international funds. Fund (ticker symbol) 1-year return 3-year return 5-year return Expense ratio Minimum investment Total assets Columbia Acorn International A (LAIAX) 38. 5% 4. 1% N/A% 1. 6% $1,000 $54 million Causeway International Value Inv (CIVVX) 37. 5% N/A% N/A% 1. 3% $5,000 $600 million.

T. Rowe Price Emerging Markets Stock (PRMSX) 36. 9% 10. 0% 7. 9% 1. 4% $2,500 $511 million Preferred International Value (PFIFX) 34. 9% 6. 2% 6. 0% 1. 0% $1,000 $430 million Tweedy, Browne Global Value (TBGVX) 32. 5% 3. 9% 6. 4% 1. 4% $2,500 $4. 9 billion SSgA Emerging Markets (SSEMX) 32. 4% 10. 2% 5. 0% 1. 2% $1,000 $742 million Longleaf Partners International (LLINX) 30. 9% 6. 3% 12. 1% 1. 8% $10,000 $2. 2 billion Oakmark International I (OAKIX) 29. 2% 6. 9% 8. 0% 1. 2% $1,000 $3. 8 billion American Funds EuroPacific Gr A (AEPGX) 29. 1% 2. 8% 3. 8% 0.

9% $250 $32. 8 billion American Funds Capital World G/I A (CWGIX) 27. 9% 7. 1% 8. 2% 0. 8% $250 $19. 0 billion Julius Baer International Equity A (BJBIX) 26. 9% 7. 9% 9. 8% 1. 3% $2,500 $2. 8 billion First Eagle Global A (SGENX) 26. 7% 16. 7% 16. 3% 1. 3% $2,500 $4. 5 billion Vanguard International Growth (VWIGX) 26. 4% 1. 1% 0. 7% 0. 7% $3,000 $6. 8 billion American Funds New Perspective A (ANWPX) 25. 6% 2. 1% 4. 7% 0. 8% $250 $30. 4 billion Artisan International (ARTIX) 25. 5% 0. 1% 5. 3% 1. 2% $1,000 $6. 2 billion Loomis Sayles International Eqty A (LIERX) 24.

6% -0. 8% 2. 8% 1. 2% $2,500 $5 million T. Rowe Price International Stock (PRITX) 22. 3% -1. 1% -1. 8% 0. 9% $2,500 $5. 1 billion American Century Intl Growth Inv (TWIEX) 21. 6% -3. 3% 0. 1% 1. 3% $2,500 $2. 4 billion Putnam International Equity A (POVSX) 19. 6% -1. 2% 2. 6% 1. 2% $500 $4. 4 billion Data updated as of: June 10, 2004 * LSIEX data for institutional shares. Retail shares are available, but have not been assigned a ticker symbol. Source: http://money. cnn. com/funds/money100/table/money100_intl/money100_intl_by_1year_return. html Updated daily by Morningstar.

Now I would like to analyze the “success stories” of the Morningstar top-rank funds, so we see the best investment policies and developments. American Funds Capital World G/I is world stock with $18,952 million net assets. Main holdings are Altria Group, AstraZeneca, Diageo, Soc Generale and Vodafone Grp. Annual returns in fund constituted -4. 96 in 2001, -7. 15 in 2002, 39. 07 in 2003 and 0. 83 in 2004. American Funds EuroPacific Gr A falls into the category of foreign large blend. Major holdings are AstraZeneca, Vodafone Grp, Kon Kpn Nv, Mitsui Sumitomo Insurance and Nestle. Annual returns in fund constituted -12.

18 in 2001, -13. 61 in 2002, 32. 91 in 2003 and 2. 95 in 2004. Artisan International Inv falls into the category of foreign large growth with $6,181 million net assets. Major holdings are Allianz, UBS AG, ITV, Muenchener Ruckversicherungs-Ges AG and Nestle. Annual returns in fund constituted -15. 86 in 2001, -18. 90 in 2002, 29. 14 in 2003, 1. 43 in 2004. Julius Baer International Equity A falls into the category of foreign large blend with $2,772 million net assets. Major holdings are BP, TOTAL, Vodafone Grp, Nokia and Komercni banka. Annual returns in fund constituted -18. 93 in 2001, -3. 60 in 2002, 35. 92 in 2003 and 1.

92 in 2004. Longleaf Partners International falls into the category of foreign large value with $2,187 million net assets. Major holdings are NIPPONKOA Insurance, Nippon Telegraph & Telepone, Millea Hldgs, Shaw Communications B and Vivendi Universal. Annual returns in fund constituted 10. 47 in 2001, -16. 52 in 2002, 41. 52 in 2003 and 5. 6 in 2004. The first conclusion I would make is that several major holdings (e. g Vodafone Grp) take part in numerous successful international mutual funds. Observing the dynamics, we can make a conclusion that the end of global economic recession lead to boost in annual returns.

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