They are the ultimate go-anywhere funds — global funds that can invest virtually anywhere, regardless of geography — and they are growing in number.
They are the ultimate go-anywhere funds — global funds that can invest virtually anywhere, regardless of geography — and they are growing in number.
Fifteen new "world stock" funds were launched this year as of June 30, bringing to 178 the total number of such funds, according to Morningstar Inc. of Chicago.
That compares with 17 launched during all of 2007.
It is a trend, however, that signals more than the willingness of fund companies to invest overseas; it also signals a willingness to let fund managers take more risk, industry experts said.
"I think the biggest trend or difference we are seeing in the marketplace is that the appetite for risk is coming back," said Alan A. Brown, executive vice president of mutual funds at Nuveen Investments Inc. of Chicago.
That is because in "choppy" markets, managers that are "unconstrained" may have an easier time finding alpha, he said.
Generating better returns than the broad market is the idea behind the $404 billion Nuveen Tradewinds Global All-Cap Fund, which was launched in March 2006, Mr. Brown said.
The fund is still relatively new, but its go-anywhere style has paid off in the short term.
It had a -3.17% year-to-date return as of July 7, placing it among the top 2% of its world stock category, according to Morningstar. It had a one-year return of -3.48%, placing it in the top 4% of its category.
Its performance was not bad when compared with the Standard & Poor's 500 stock index, which was down 13.79% for the same period and had a one-year return of -16.52%.
Not all global funds, however, are created equal.
That is true of all funds, but especially global funds because so much relies on the manager.
"Some of them do adhere to a style, maybe value or growth," said Jeff Tjornehoj, a Denver-based analyst with Lipper Inc. of New York. "But there are certainly managers out there that want to be able to move about that space without interference."
To some extent, it is a return to a time when stars such as Peter Lynch, former manager of the Magellan Fund, from Fidelity Investments of Boston, ruled the fund world, Mr. Brown said.
That is something the fund industry tried to get away from after the technology bubble burst in May 2000, Mr. Tjornehoj said.
The concern was that a fund built around a "star manager" loses assets it may never again recover if the manager leaves or falls out of favor, he said.
A fund built around a specific style — not an individual manager — doesn't necessarily have the same problem, Mr. Tjornehoj said.
So does the development of new global funds mean a return to an industry that focused on star managers?
No, said Burton Greenwald, a mutual fund consultant based in Philadelphia.
It merely means that fund companies are beginning to think outside the style box popularized by Morningstar, he said. "Anytime you have a severe drop in securities prices, everyone starts thinking about moving away from rigid style boxes to a much more flexible approach," Mr. Greenwald said.
That doesn't mean, however, that the style box becomes irrelevant, said Samuel Rocco, an analyst with Morningstar.
While it may be that there are true go-anywhere funds, most global funds have some sort of bias toward growth or value, if not toward a single capitalization, he said.
Applying the style box to global funds can reveal what that bias is, Mr. Rocco said.
Investors will likely get a chance to test his theory.
With markets becoming more global, more fund companies are expected to roll out global funds, Mr. Brown said.
"I don't think it's a fad," he said.
E-mail David Hoffman at dhoffman@investmentnews.com.
