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Fund Spy

The Second Quarter in International Stock Funds

Growth led the markets, while value and Asia took a breather.

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International stock indexes continued to hit new all-time highs in the second quarter of 2021, as the COVID-19 vaccine rollout fueled a sense of cautious optimism throughout much of the world. As was the case in the first quarter, however, international equities didn’t perform as well as their U.S. counterparts. The Morningstar Global Markets ex-US Index gained 5.7% for the quarter, less than the 8.4% gain of the Morningstar US Market Index.

The most extreme performance patterns came from regional equity funds, on both the high and the low side. Latin America stock funds had the second-best returns of any Morningstar Category for the quarter, gaining an average of 17% after dropping sharply at the end of the first quarter. On the other end of the scale, Japan stock funds had the worst returns of any Morningstar Category, losing 1% for the quarter, and Pacific/Asia ex-Japan stock funds didn’t do much better. Returns for other regional foreign-stock categories were tightly clustered in the middle, ranging from a 5.5% gain for diversified emerging markets to 7.8% for Europe stock.

Value stocks enjoyed a resurgence relative to growth stocks in late 2020 and early 2021, but they took a breather in the second quarter as growth once again led the way. The new world large-stock growth Morningstar Category gained an average of 8.5% for the quarter, and foreign large growth funds gained 6.8%, while world large-stock value and foreign large value lagged behind with 5.0% and 4.1% gains. A similar pattern was evident in U.S. stock funds.


Artisan Developing World (APHYX
This fund, with a Morningstar Analyst Rating of Bronze, has been a stellar performer since its 2015 inception, but it has taken investors on a rollercoaster ride so far in 2021. It was one of the worst performers of the diversified emerging markets Morningstar Category in the first quarter, losing 2.5% to rank in the category’s bottom 1%, but it was one of the best performers in the second quarter, with a 9.6% gain that ranked in the peer group’s top decile. The fund’s aggressive growth tilt and high U.S. exposure are among the factors that hurt its returns early in 2021, but helped more recently. It’s also a very concentrated fund, and many of its top holdings (such as Visa (V), Mercadolibre (MELI), NVIDIA (NVDA), and Unity Software (U)) performed much better in the second quarter than in the first.(

WCM Focused International Growth (WCMIX
This Silver-rated fund is similar in many ways to Artisan Developing World, except that it focuses on stocks from developed markets. It’s more growth-oriented than the average fund in the foreign large growth Morningstar Category, and it also has more U.S. exposure, two features that helped its category returns in the quarter just ended. It’s also fairly concentrated, with 42 holdings as of the Jan. 31, 2021, portfolio, so a few holdings can have a big effect. After a lackluster first quarter in which it trailed the foreign large-growth category, the fund has been on fire for the past three months, gaining 11% in the second quarter to rank near the top of the peer group.(

PGIM Jennison Global Opportunities (PRJZX
This Bronze-rated fund is part of the new world large stock growth Morningstar Category, which consists of the large-cap growth part of the old world stock category. (World stock funds hold significant amounts of both U.S. and non-U.S. stocks.) In the first quarter of this year it lost 7.1%, the worst return out of the 93 funds in the category, but it came roaring back to rank in the peer group’s top decile in the second quarter. As with the Artisan and WCM funds, many of this fund’s holdings are growth stocks that struggled in the first quarter, when the market favored value, but came back strongly over the past three months. These include U.S. giants like (AMZN), Tesla (TSLA), and Apple (AAPL), as well as international stocks like MercadoLibre and WuXi Biologics.(


T. Rowe Price Japan (PRJPX
This fund has achieved outstanding long-term results over the eight-year tenure of manager Archibald Ciganer, including returns that ranked in the top 2% of the Japan stock Morningstar Category in both 2019 and 2020. However, it crashed hard in the first half of 2021; not only was Japan stock one of the worst-performing Morningstar Categories during this period, this fund ranked near the bottom of its category peers in both the first and second quarters. Top holding Softbank Group lost 3.6% in the first quarter and 16.9% in the second quarter, and several other holdings suffered double-digit losses. Occasional short-term pain like this is no reason for alarm given the fund’s excellent long-term record, and doesn’t affect the fund’s Bronze rating.(

Causeway International Value (CIVIX
This is another fund with a fine long-term record and many other positive features, but a strategy that has been out of sync with recent market conditions. Managers Sarah Ketterer and Harry Hartford have managed the fund for the past 20 years using a distinctive and disciplined value approach. The past three months have not been a very good period for the foreign large value Morningstar Category as a whole, and this fund’s returns have been among the category’s worst over that time. None of its holdings suffered catastrophic losses, but seven of the 10 largest holdings (as of March 31, 2021) had negative returns for the quarter. The fund has always been prone to periods of short-term underperformance, given the managers’ long time horizon, but it remains an excellent fund for patient investors, as shown by its Gold rating.(

FMI International (FMIJX
This is another Gold-rated fund that has gone through a temporary rough patch. It’s a core international stock fund that resides in the foreign large blend Morningstar Category, though the managers consider themselves value investors. The fund’s 10-year returns are among the best in the category, but its valuation sensitivity has often hurt it in recent years relative to its category peers. Its performance so far in 2021 has been a study in contrasts. It ranked in the category’s top 5% in the first quarter, but fell to the bottom 15% in the second quarter, as top holdings such as Sony (SONY), Philips (PHG), and Henkel AG (HENOY) lost ground.

David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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