U.S. institutional money managers continued to increase their exposure to international securities in 1994, despite a decline in most foreign markets during the year.

The average international equity investment in a domestic portfolio rose 37%, with domestic plan sponsors doubling the total amount allocated to equities overseas to $60 billion last year, according to Greenwich Associates, a Connecticut-based consulting firm.

The increasing interest in international investment has been fueled by a variety of factors, including better technology, deregulation of overseas markets, and renewed emphasis on diversification, said John G. Colon, a Greenwich Associates partner.

Historically, international equity markets have had higher rates of return than many other asset classes, according to Mr. Colon. Therefore, more pension plan sponsors have decided to tap the higher-yielding assets, even though many overseas investments have made disappointing showings of late.

A study conducted late last year by Greenwich Associates, for example, found that 58% of U.S. pension funds had active international stock portfolios, and indicated the figure would reach 82% by the end of this year.

Those figures were culled from research on 1,620 pension funds.

In addition, the same study found that U.S. pension fund managers expect to increase allocations to international equities from 8.35% of total fund assets to 11.2% by 1997 - an estimated $140 billion increase.

"The U.S. is really the last major industrial country to look seriously beyond its own markets and borders for investment opportunities," said Charles G. Smith, president and chief executive of Nations Gartmore Investment Management.

Nations Gartmore, which opened its doors last month, is a strategic alliance forged between NationsBank Corp. and a London-based money manager to increase the bank's international investment capabilities.

Mr. Smith said that in setting up the alliance NationsBank was driven by the perceived U.S. shift towards an international outlook, the bank's global ambition, and the potential for greater returns from the international markets, which aren't as mature as the U.S. market.

Mr. Smith offered as examples the economies of the Far East, whose extremely rapid growth is carrying over into the region's stock markets.

Greenwich Associates' Mr. Colon agreed. He added, however, that better technology and overseas deregulation have also made international investment easier.

Mr. Colon said that for a long time, simple maneuvers involved in transactions - things like settlements and clearing - that "were taken for granted in the domestic markets" were very difficult to do in many of the international markets, increasing the risk in those market places.

Overall, Mr. Colon said, Greenwich Associates was not necessarily surprised by the findings.

"It's in some ways interesting to speculate on where it might all lead," he said. "How far, how fast, where are we going to end up."

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