It’s a big world out there. We hear a lot of talk about the “global economy,” but the truth is much more complicated. It’s more accurate to say that the world is built on a collection of national and regional economies, each with its own unique attributes and near-term outlooks.
Unfortunately, American investors all too often ignore the rest of the world or pay attention to what’s happening overseas only insofar as it affects their U.S.-based securities holdings. In doing so, they miss exciting growth opportunities and limit their portfolios’ diversification potential – both of which are ever more critical in an increasingly complex and uncertain economic environment.
If you’re looking to add international exposure without pushing the limits of your risk tolerance, international value funds may hold a partial solution. Like their domestic counterparts, international value funds seek mixes of assets that are undervalued relative to their intrinsic worth. However, as global funds, they provide crucial exposure to the 97% of consumers not located in the U.S.
Not sure where to start? These five international value funds are among the class’ best regarded.
1. Third Avenue International Value Fund
Third Avenue International Value Fund, which is a part of Third Avenue Management (Trades, Portfolio), is a small but high-performing international value fund that, according to its website, “employs an opportunistic and long-term approach to fundamental value investing across the globe [using an] unconstrained investment mandate [that] allows us to pursue what we believe are the best opportunities across geography, industry and asset classes.” It has approximately $130 million in assets under management.
Lead portfolio manager Matthew Fine populates Third Avenue International Value Fund with an “eclectic blend of securities from all over the globe that reflect independent thought and [a] long-term investment approach.” His selection criteria include an “understandable business model with a high-quality balance sheet; assets that are difficult to replicate; management teams aligned with shareholder interests; [and discounts] meaningfully relative to underlying business value.”
Fine’s work is paying dividends, literally and figuratively: Third Avenue International Value Fund was up more than 10% in 2016, an uneven year for international securities.
2. Mondrian International Equity Fund
This small but potent fund invests at least 40% of its assets in non-U.S. equities. To the extent that it does invest in U.S. equities, it focuses on larger multinational firms that earn substantial revenues in international markets – providing valuable diversification and at least some measure of protection against the vagaries of the U.S. economy. Mondrian International Equity Fund is highly rated by well-regarded fund arbiters such as Morningstar.
3. DFA International Core Equity Portfolio
DFA International Core Equity Portfolio invests in international firms that are substantially mispriced by the market. Although its assets are allocated to a wide range of companies across a representative range of industries, its overall weight is skewed slightly in favor of small-cap firms. For investors seeking emerging, undervalued growth opportunities around the world, this is an important point of distinction.
4. Tocqueville International Value Fund
Named for Alexis de Tocqueville, the great French philosopher and world traveler, Tocqueville International Value Fund takes positions in larger, slower-growth, substantially mispriced companies across a diverse range of geographies. At least 65% of its assets are invested in international equities at any given time with higher proportions as market conditions dictate.
5. American Funds New World Fund
This large fund has more than $25 billion in assets under management. It invests in developed- and developing-world companies across a wide range of sectors with value as a uniting theme. The impressive degree of diversification is an important consideration for investors who wish to gain international exposure without undue risk.
Want to weigh in on other international investing opportunities? Let us know in the comments box below.
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