Investors Flee Foreign Funds
Understand what the "abandon ship" mentality means to your funds.
Shareholder redemptions inflicted a lot of pain on stock funds in 2008, and international equity funds were among the most wounded. International stock funds shed roughly one fourth of their total assets due to redemptions from November 2007 to November 2008, according to Morningstar data. Meanwhile, U.S. stock funds lost about 10% of their assets to redemptions after accounting for market losses, while the taxable-bond and municipal-bond categories experienced positive flows for that time frame. That result isn't terribly surprising given that international stock funds generally underperformed their domestic counterparts. And with staggering losses all around for equity funds, shareholders sought refuge in fixed-income funds and/or U.S. Treasury bonds.
Although a handful of mutual fund companies have not yet reported their net flow data for 2008, we looked at some of the individual funds in the international stock category that were victims of last year's massive sell-off. The table shows funds that lost roughly 9% to 28% of their assets in addition to losses due to stock price performance.
Interestingly, the relative performance of these funds for 2008 varied. For example, Oppenheimer Developing Markets (ODMAX) lost less than more than 80% of its peers in the diversified emerging-markets category. However, fleeing investors caused the fund's assets to drop another 27% by the end of 2008. On the other hand, foreign large-value offering Templeton Foreign (TEMFX) and world-stock fund Third Avenue Value (TAVFX) landed in the bottom quartile of their respective categories for the year, and a significant number of investors headed for the exits.
Karin Anderson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.