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recommendation on good replacement for Harbor International fund
Hi folks, I was hoping the community good provide some good options on international funds I can consider to replace Harbor International in my portfolio. This has been a long term hold for me but the fund has underperformed over the past 3 and 5 year periods. Would greatly appreciate any advice you can provide here. thanks!
My advice to you... Do not redeem from a manager solely for performance reasons. If your fundamental view of the manager has changed, well then sure, otherwise stick tight.
My opinion, go passive and spend your active risk budget in the most inefficient areas of the market such as International Small Caps and Emerging Markets.
A few you should look at: Matthews Pacific Tiger, Artisan Intl Value, Capital World Growth&Income (American funds), Polaris Global Value, Vanguard Intl Growth, Artisan Global Equity, Artisan Global Value I have been investing in Matthews Pacific Tiger for 5 years, and have been happy with it.
A favorite around here seems to be FMI Int'l (FMIJX). Personally, I tend to tread carefully with highly concentrated funds (33 stocks vs. 67 for Harbor), but its extremely low turnover (9%) speaks to its conviction in its holdings. And you can't argue with performance.
It is still large cap; but in comparison Harbor leans toward giant cap. It is heavily focused on industrials (and materials), while Harbor is focused on more defensive/value areas like healthcare and financials. That difference in emphasis could explain a lot of the performance differences. So a question is whether that trend will continue or reverse.
A fund with a much closer profile (59 stocks vs. 67, mostly similar sector weightings, 30% turnover vs. 25%) is LZIOX/LZIEX. While both Harbor Int'l and Lazard are classified as blend funds, they both come from a lineage of value oriented investing, which might help to explain the similarity.
I would take a serious look at the very low cost (ER 0.20%) and liquid (850K avg. daily volume) EFAV which has performed well since inception and its underlying index has very attractive back-tested performance:
I bailed on Harbor Int'l about three years ago. I also recommend FMIJX. Third quarter report just came today and I have linked it. I think the discussion will give you a good idea of how cautiously the fund is managed.
I won't even mention OAKIX, which lost almost 10% after Brexit was declared. Anybody still holding on to it?
Sometimes the best time to invest in a fund is after it's gone through a rough patch. Obviously you still have to have long-term conviction, but too many people chase performance of outperforming funds and subsequently hold them as they take a turn for the worst.
@ Soupkitchen: Like some others, I threw in the towel on OAKIX too and decided to put proceeds into ARTGX in one account, but in another account, I sold off all but $2500 in favor of FMIJX. I have noticed OAKIX has started coming back a bit, lets see how long it lasts. I decided to keep a foothold in it because historically until 3-4 years ago it was a fine fund with good management. Maybe they will be back.
TBGVX. Tweedy Brown. I owned it many moons ago. I didn't leave it from dissatisfaction. If the same policy still holds, they dollar-ize everything, minimizing FX risk. But, when the dollar is strong, it's a drag.
@MikeW You might put the Aston/Pictet International Fund on your watch list. It would be more similar to the Harbor fund than others mentioned so far. APINX is only two years old, but it has demonstrated good defensive properties since the dust-up started in Europe last year. Low turnover so far. Measured as a LC blend fund, it has a median cap of around 5B. It has some size (currently around $1B, almost entirely institutional money). When international is on a tear, I can't recall a Pictet fund that hasn't done well (although my memory stops about 10 yrs ago on this, so take that with some salt, so to speak).
For a value tilt, I would take a good look at IVFIX. And if you are able to buy SGOVX without commission, I would not hesitate to use it. Both of these management teams have done a great job. Federated goes for strong dividends, First Eagle is low volatility. EFAV is doing quite well, as have all minimum-volatility ETFs.
APINX is only two years old, but it has demonstrated good defensive properties since the dust-up started in Europe last year. Low turnover so far. Measured as a LC blend fund, it has a median cap of around 5B. It has some size (currently around $1B, almost entirely institutional money).
LZIEX has a somewhat lower turnover rate (23.6% compared to 53%), and a somewhat larger weighted market cap ($50.1B compared to $43B or Harbor's $67B). AUM are close, with LZIEX having $1.2B, of which 90% is institutional, and APINX having $0.9B AUM. Sector weightings are likewise similar.
In fact, APINX and LZIEX may resemble each other more closely than they resemble Harbor.
When international is on a tear, I can't recall a Pictet fund that hasn't done well (although my memory stops about 10 yrs ago on this, so take that with some salt, so to speak).
Your memory is better than mine. The only Pictet fund I (or apparently VintageFreak) could remember offered in the US was Pictet Global Water. While Pictet is a significant presence in funds offered outside the US, it seems that their US-sold funds folded over a decade ago.
In particular, there was a Pictet International Equity fund. Whether that bears any resemblance to the Aston fund, I don't know. Here's the Bloomberg profile (stating that it existed from August 25, 2000 to Sept 8, 2003), the SEC filing to shut it down (along with Global Water), and the 2002 prospectus (showing six Pictet funds). http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=28148103
To reiterate what was mentioned above regarding FMIJX, the main reason for out performance has been the currency hedge. If you are moving from a non-dollar hedged fund (which I assume most are) to a dollar hedged you run the risk of being whipsawed on the trade. I know it feels like the USD will never go down but it will, and when it does FMIJX should under-perform.
While what TD1 says is true about the potential whipsaw when the dollar does finally decline, I wouldn't make your decision for FMIJX based on the FX hedge alone. If you like the way FMI approaches investing, which is to construct a concentrated portfolio of high quality businesses at cheap valuations, then you should still consider the Fund.
To speak to performance, yes the FX hedge has benefited the Fund longer-term, however, over the past year (through 6/30) the EAFE was down 10% in both USD and local currency terms, and the Fund up 75 bps => hedge has not been the main reason for outperformance. Since inception, the Fund is outperforming EAFE (USD and local).
For foreign large growth, JOHAX is my choice, although it is recovering from a serious drop in 2015. Over the past few years, I have cut back on pure foreign stock funds in favor of global funds. My best result has been with ARTRX, worst with now-departed Oakmark offerings. Good global managers should be able to allocate more or less to foreign equities as conditions warrant and do it better than I can. If I recall correctly, FMIJX hedges currency when conditions call for it, not always.
It's of course impossible to implement a perfect hedge, but FMI plans to consistently hedge 80%+ to keep performance tied as closely as possible to its individual investments and not currency fluctuations.
And if I'm not mistaken, JOHAX is closed to new investors.
It's always difficult to divine hedging policies, even with M* analyst breadcrumbs. FWIW, M* writes that FMIJX "fully hedges its non-U.S. currency exposure to the dollar." Not merely that it is currently hedged.
The prospectus, um, hedges its currency policy by saying that it "may hedge a significant portion of its foreign stock investments", but the rest of the sentence suggests a general bias toward hedging: " in an effort to have its returns more closely reflect the market performance of its investments, rather than the value of the currency".
That is, it hedges to take currency out of the equation, not to protect one way against a rising dollar. That suggests hedging most of the time.
To build on JoJo26's statement, impressions often don't match reality. It feels like the dollar is going up, but it hasn't over the past year. I suspect that feeling is due to at least a couple of factors: the dollar is already very high (so just standing still, it feels like its value is growing), and Brexit pummeled the pound Sterling (making the dollar look good relative to one currency, though not relative to the world).
Comments
My opinion, go passive and spend your active risk budget in the most inefficient areas of the market such as International Small Caps and Emerging Markets.
Matthews Pacific Tiger, Artisan Intl Value, Capital World Growth&Income (American funds), Polaris Global Value, Vanguard Intl Growth, Artisan Global Equity, Artisan Global Value
I have been investing in Matthews Pacific Tiger for 5 years, and have been happy with it.
It is still large cap; but in comparison Harbor leans toward giant cap. It is heavily focused on industrials (and materials), while Harbor is focused on more defensive/value areas like healthcare and financials. That difference in emphasis could explain a lot of the performance differences. So a question is whether that trend will continue or reverse.
A fund with a much closer profile (59 stocks vs. 67, mostly similar sector weightings, 30% turnover vs. 25%) is LZIOX/LZIEX. While both Harbor Int'l and Lazard are classified as blend funds, they both come from a lineage of value oriented investing, which might help to explain the similarity.
Index Performance
Kevin
http://www.fiduciarymgt.com/funds/shrpt/qly_shrpt_063016.pdf
Regards,
Ted
http://money.usnews.com/funds/mutual-funds/rankings/foreign-large-blend
Profile sheet:
https://astonfunds.com/includes/modules/assets/controllers/fileDownload.php?file=1469561876_FS_ASTON_PictetIntlFd_2Q16_063016_FS163-AC.pdf&id=1876&r=/funds/aston-pictet-international&type=file
Website:
https://astonfunds.com/funds/aston-pictet-international
Regards,
Ted
http://www.morningstar.com/funds/XNAS/FIONX/quote.html
In fact, APINX and LZIEX may resemble each other more closely than they resemble Harbor. Your memory is better than mine. The only Pictet fund I (or apparently VintageFreak) could remember offered in the US was Pictet Global Water. While Pictet is a significant presence in funds offered outside the US, it seems that their US-sold funds folded over a decade ago.
In particular, there was a Pictet International Equity fund. Whether that bears any resemblance to the Aston fund, I don't know. Here's the Bloomberg profile (stating that it existed from August 25, 2000 to Sept 8, 2003), the SEC filing to shut it down (along with Global Water), and the 2002 prospectus (showing six Pictet funds).
http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=28148103
(shutdown) https://www.sec.gov/Archives/edgar/containers/fix048/945774/0000940400-03-000487.txt
(2002 Prospectus) https://www.sec.gov/Archives/edgar/data/945774/000093506902000363/0000935069-02-000363.txt
To speak to performance, yes the FX hedge has benefited the Fund longer-term, however, over the past year (through 6/30) the EAFE was down 10% in both USD and local currency terms, and the Fund up 75 bps => hedge has not been the main reason for outperformance. Since inception, the Fund is outperforming EAFE (USD and local).
And if I'm not mistaken, JOHAX is closed to new investors.
The prospectus, um, hedges its currency policy by saying that it "may hedge a significant portion of its foreign stock investments", but the rest of the sentence suggests a general bias toward hedging: " in an effort to have its returns more closely reflect the market performance of its investments, rather than the value of the currency".
That is, it hedges to take currency out of the equation, not to protect one way against a rising dollar. That suggests hedging most of the time.
To build on JoJo26's statement, impressions often don't match reality. It feels like the dollar is going up, but it hasn't over the past year. I suspect that feeling is due to at least a couple of factors: the dollar is already very high (so just standing still, it feels like its value is growing), and Brexit pummeled the pound Sterling (making the dollar look good relative to one currency, though not relative to the world).