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The Bear Doesn't Scare This Foreign Fund

Morgan Stanley Institutional International Equity may not be a big winner during rallies, but this conservative foreign-stock fund has more than made up ground in down markets.


Greg Carlson: The Medalist of the Week is Morgan Stanley Institutional International Equity (MSIQX). Now, although it has "institutional" in the name, the fund is available in quite a few retirement plans. It's a relatively conservative foreign-stock fund; it lands in the foreign large-blend category. It's quite focused on large-cap stocks, particularly those that look undervalued relative to their prospects yet have sturdy balance sheets, solid margins, and great cash flow prospects.

The fund doesn't tend to invest much in emerging markets because the managers haven't found much there that fits their criteria. As a result, the fund is less volatile than most of its peers. It tends to underperform in big rallies; however, it has more than made up ground in down markets. Thus, its risk-adjusted returns, in particular, are quite good.

The management team is quite experienced. They've had a couple of folks leave for retirement reasons; however, the leader of the team has been with the team for 20 years and a comanager on the fund since 1999. The fund's record over that span is excellent. There are several comanagers with an average of six years' experience with the team; most of those either worked with the leader of the team in the past or had known him for other reasons.

We lowered the Morningstar Analyst Rating to Bronze recently due to these manager changes; however, we still have a lot of confidence in the fund's long-term prospects.

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