Skip to Content
Investing Specialists

Best of Breed International Equity Funds

The data suggest you should focus on passively managed funds for the majority of your portfolio's international exposure, but it doesn't have to be an either/or choice.

Mentioned: , , , , , , , ,

When you’re thinking about whether to use active or passive funds for your portfolio, it’s worth considering several different factors, including how much time you have available to research, what kind of asset-class exposure you need, and whether you have the patience to put up with potential underperformance from active managers. For many investors, an all-index approach is the easiest and least time-consuming way to build a portfolio aligned with their goals and risk tolerance. It's also typically more tax-efficient for assets held in taxable accounts.

If you haven’t ruled out active funds for a portion of your portfolio, though, it’s worth taking a deeper dive into the areas where active management has the potential for outperformance, as well as areas where there it’s tough to add value versus a benchmark. A few weeks ago, I wrote about how to apply our research where active management has the greatest potential payoff or penalty for different types of domestic-equity funds. The research looked at the range of pre-fee alphas, a measure of value added versus an index, for different categories of funds. When returns tend to be tightly clustered, there's less of a potential payoff for active management. When there's a wider dispersion of returns, there's a greater potential reward--or penalty--for straying from a market benchmark.

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

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.