Foreign-Stock Funds That Hunt Stateside
Only a small group of foreign-stock funds buy U.S. companies in a meaningful way.
All active mutual fund managers are afforded some flexibility when it comes to building the portfolios they oversee. In some cases that might mean that varying levels of cash can play a prominent role. In others it may mean the fund manager has the ability to search up and down the market-cap ladder and/or across a company's capital structure. At more-conventional funds, managers may deviate from their benchmark indexes in more-subtle ways, such as the slight over- or underweighting of a sector or including some nonindex names in the portfolio.
One area of note comes in the realm of geography. Of course, world-stock funds generally have the greatest amount of flexibility in terms of their U.S./non-U.S. split--some try to keep that split stable, while others will let the geographic balance vary as conditions present more opportunities in one area or another. As my colleague Karin Anderson previously addressed in an article that looked at concentrated funds, the percentage of foreign stocks in domestic-equity offerings overall has trended upward over the past decade, to roughly 7% or 8% of assets from less than 2% on average. Some fund families, such as the American Funds, have long held a substantive amount of foreign companies in their U.S.-centric portfolios, while others including MFS have only more recently begun to take meaningful positions in non-U.S. stocks.
Bridget B. Hughes has a position in the following securities mentioned above: BAC. Find out about Morningstar’s editorial policies.