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Fund Spy

Oakmark Funds Sturdy Despite Outsized Japan Exposure

The shop's outsized allocation has taken a toll, but it's less than you'd expect.

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David Herro, Morningstar's International Stock Manager of the Decade, has become the financial media's go-to guy for assessing the implications of the Japanese catastrophe for U.S. fund investors. That's for good reason. At the close of 2010, the four international funds in the lineup of Oakmark--the Chicago-based fund shop where Herro is a principal--had roughly 22.4% of their combined assets invested in Japan.

Each fund's stake is higher than the respective peer group's norms--a function of Herro's longstanding, contrarian embrace of Japanese equities. While investor sentiment about the country long ago calcified into more or less permanent pessimism, Oakmark's contrarian manager--who also serves as its chief investment officer of international equities--has perceived opportunity aplenty amid what he considers an increasingly shareholder-friendly culture.

On the Mark
We don't yet know how (or if) Oakmark's Japan allocations have changed as a result of the crisis. Given Herro's recent comments, though, it seems probable that any substantial downtick would owe not to the manager selling stocks but to price depreciation. Indeed, Herro has indicated that, if the disconnect between the stock prices and the fundamental value of his Japanese holdings persists, he'll likely buy additional shares.

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