For investors looking to diversify overseas, banking companies with international mutual funds are ready and waiting.
Though they are relatively new to mutual fund management, U.S. banks managed about $19.3 billion of assets in more than 230 international mutual funds as of March 31, according to CDA/ Wiesenberger, Rockville, Md.
The advisers of these funds range from the highly specialized emerging debt manager Offitbank, a New York investment house for the well-heeled, to BankBoston Corp., which sells most of its international funds to retail investors.
This year, increased demand for participation in overseas markets is coming from investors who deem the U.S. equity market overvalued and are ready to reallocate a portion of assets to foreign securities.
"We've seen very high search activity as pensions have been reallocating money from overvalued U.S. stocks into relatively cheap international alternatives," said Andrew B. Williams, a senior vice president of Glenmede Trust Co., Philadelphia.
Mr. Williams manages Glenmede's $1.3 billion international equity portfolio, which, in addition to being offered to its own clients, is distributed through wirehouses such as Smith Barney Inc. Glenmede subadvises a T. Rowe Price Associates Inc. international stock fund.
Glenmede and other international managers, including Munder Capital Management, an affiliate of Detroit-based Comerica Inc., deal mostly with institutional clients. Munder got into actively managed international funds early this year after taking a stake in Framlington Group, a London-based money manager.
Previously, it offered what is essentially an index fund that invests in American depositary receipts, along with a global bond fund.
Other banking companies including J.P. Morgan & Co. and Northern Trust Corp., Chicago, have reached out to individual investors. Morgan, which has offered international equity investments to blue-chip corporations as well as its wealthy clients since 1974, seeks through its recent partnership with American Century to sell international and global mutual funds to more ordinary folk, either directly or via retirement vehicles, such as 401(k) plans.
The New York-based bank even opened a few new funds this year, including the JPM Pierpont Emerging Markets Debt Fund and, for equity investments, the International Opportunity Fund. The latter has raised more than $187 million of assets from institutional investors and $40 million from individuals.
Before anyone rolls into an international fund, investors typically pick over the managers.
"A track record is important," said George C.W. Gatch, a Morgan vice president, adding that prospects are "also looking for investment management firms which are leaders in international markets and have networks of portfolio managers around the world."
Most international investment managers find that U.S. investors are somewhat torn between their rational desire for diversification and a reticence to pull anything out of high-performing markets at home. That mentality and the strength of the U.S. dollar against other currencies cools demand.
