The Morningstar 2010 Investment Conference in Chicago was chock-full of sessions on international investing, and the hallways were abuzz with talk of emerging markets. Yet some fund managers damped the excitement, saying that although emerging markets are hot, these investments will not be able to live up to expectations.

The conference, held in late June, included well-known names like Vanguard's Bill McNabb and Putnam Investment Funds' Robert Reynolds, as well as mutual fund managers from across the country. While some speakers assured the audience that emerging markets such as China and India would continue to grow exponentially, others said that expectations may be higher than the potential for growth.

"There is pessimism around international investing because there are many issues to face in the global economy," said Daniel O'Keefe of Artisan Partners.

"People are so focused on the problems of the developed world, their default mechanism is to go to emerging markets where the expectation is that they will continue to grow. There is as much risk, if not more, for stocks in emerging markets."

O'Keefe points out that where a company is listed does not necessarily reflect where it invests its money. A U.S. company can invest primarily overseas, yet still be considered a domestic company. It is important to look at where a company's revenues are generated. "It makes more sense than ever to invest with a global manager that is able to make the best decisions of where to invest globally," he said.

Mark Yockey at Artisan is more optimistic about the international market.

"Opportunities in Europe are getting better and better every day," he said. "International investing is like domestic investing — invest in good companies and don't pay too much for them, and you're fine."

Brent Lynn of Janus said in a session on foreign stock picking that although China is a "juggernaut," he sees more opportunity in India if only because it is further behind the curve in terms of growth.

Some at the conference were on the fence about emerging markets. Ryan W. Kruger, a partner at Hamilton Financial Partners in Tulsa, noted some fund managers were warning that emerging markets will come up short. "While we're not sitting on the sidelines in terms of emerging markets, we are deciding whether to dial up or dial down our investments," Kruger said.

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