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Smooth Operators

These foreign funds stayed calm in rough waters.

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The market meltdown in 2008 and the sharp reversal that followed during most of last year have made for an exceptionally volatile three-year period for global equity funds. And in most cases, last year's strong returns haven't erased the pain of the sell-off. On average, foreign-large cap funds were down 44% in 2008 and gained 33% in 2009. So, the group averaged a loss of 6% per year for the past three years.

The 10-year picture for foreign large-cap funds is rosier but certainly not mind-blowing. That's because the trailing 10-year period now begins with the 2000-02 bear market (when many funds posted double-digit losses during each calendar year) in addition to 2008's downturn and excludes the red-hot gains of 1999. And so, the typical foreign large cap returned 1% per year during the past decade.

The Premium Screener can point to funds that bested that 1% annualized gain during the past 10 years and provided a smoother ride, particularly as markets have seesawed during the past three years. To begin, we focused on foreign large-cap funds that sport reasonable price tags. The screen is also set to pull funds that rank in the top third of their respective categories for the trailing three years and that sported lower volatility (as measured by standard deviation) than  Vanguard Total International Stock Index (VGTSX). This fund tracks a customized index that combines the MSCI indexes for Europe, developed Asia, and emerging markets.

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