Thanks to the long bull market, Robert J. Herbst, a retired accountant, says plenty of his investing peers are less risk-averse than they used to be.

But that does not mean Herbst or his pals are plunging new money into international mutual funds.

"I've got no qualms with my holdings"-which include two Merrill Lynch funds with stakes in European companies-"but I'm not looking for more," said Mr. Herbst, 75, who lives outside Tampa.

After several years of foreign economic crisis, some international funds are showing signs of life. But most retired investors like Mr. Herbst still are not biting at the potential upswing in mutual funds that invest abroad.

Investors eager to preserve their nest eggs still recall the dismal returns of many overseas funds. A $100 stake in 1994 in emerging market funds on average was worth less than $72 by 1999. Why diversify outside the United States, investors ask, when large-cap domestic stocks have delivered double-digit gains for so long?

That is the powerful argument international mutual fund marketers face when trying to sell their products to U.S. investors. And retirees remain the toughest market segment to crack when it comes to international funds.

A survey conducted in November by Scudder Kemper Investments for its affinity business with the American Association of Retired Persons showed that only 24% of international fund owners planned to invest more in the category over the next six months. Eight percent said they intended to decrease their stake in international funds.

"We have not been promoting international funds recently," said Steven Shapiro, spokesman for the AARP program at Scudder. 'Things overseas are improving, but not to the point where we are pushing those funds from a marketing perspective.

Funds that invest abroad lag those investing in U.S. companies, but they are improving. Funds that invest abroad were up 1.04% in the first quarter, according to Morningstar Inc., while world funds, which can include U.S. stocks, are up 1.57%.

Funds specializing in Japan jumped an average of 14.2%. Fidelity's Japan Small Companies (off 1.4% the past three years), notched an impressive 39.09% leap for the quarter.

Latin American funds, the worst-performing group in 1998, rose 9%, driven by a surging stock market in Mexico. Even the Lexington Troika Dialog Russia-the whipping boy of overseas poor performers last year with an 80% decline-registered a 30% total return in the first quarter of 1999.

On the other hand, some international funds that performed well in recent years have now soured. according to Morningstar.

Several European funds stand out on the worst-returns list, stalled by the reception of the new currency, the euro.

Many older retirees, influenced by memories of the Depression, shy away from investment risk. But a growing proportion of them are dabbling in funds that only four years ago would have been considered excessively risky.

That trend emerges in a survey conducted in the first quarter of this year by American Century Investments, a Kansas City, Mo.-based mutual fund company managing $84 billion of assets.

About a quarter of respondents said that over the past two years they were "willing to accept a great deal of short-term volatility for the potential of maximum long-term returns."

In the company's 1996 survey, only 14% reported such a tolerance for investment risk.

Financial advisers say international funds can play a role in a retiree portfolio.

While many older investors choose to diversify their domestic equity holdings by adding bond funds, they should not confuse stability with safety, said Patricia Brennan, who owns Key Financial in West Chester, Pa.

"When you add inflation and taxes to fixed-income instruments, you lose purchasing power," she said.

Mature investors need to ensure that their capital is not eroded by inflation or by the performance of any one economy.

According to research analyst Ibbotson Associates, over the 25-year period from 1972 through 1996, a portfolio that mixed 80% U.S. and 20% foreign stocks was less volatile than one comprised solely of U.S. stocks.

Such arguments do not impress some older investors. Take Florida's Bob McEwen, the 69-year-old mayor of the small beachfront community of Indian Shores. Quick to reject the old-fashioned idea that retirees are supposed to stick solely with income investments, Mr. McEwen and his wife see stocks as the best bet to ensure their money lasts as long as they do.

But while Mr. McEwen has no inclination to trade his stock mutual funds for bonds and CDs, he is even less prone to explore international mutual funds.

"If I am not familiar with them, I stay away from them," he said.

Lately, pitching international funds means selling the idea more than actual performance. Consider the four mutual fund companies that chose to advertise specific international funds, with mostly mediocre results, in the May issue of Money magazine:

Franklin Templeton promoted its Templeton Foreign Fund, but did not talk up its actual returns. According to Morningstar, it had a total return of just 0.09% for the first quarter of 1999 and a one-year decline in return of 14.04% through March.

T. Rowe Price's ad, which says "Diversify Overseas," promotes its International Stock fund but does not point out its first-quarter return of 1.27% and its one-year return through March of 3.57%.

Warburg Pincus was an exception, touting in print the fact that its Global Telecommunications Fund had a one-year return of 67.42% through Dec. 31.

Scudder ran two ads. One, for its Greater Europe Growth Fund, did not indicate that the fund dropped 2.11% in the three months ending March 31 and had a one-year return of just 0.97%.

It did point out in a second ad that its International Fund returned 18.62% for the 12 months ending January 31, but failed to note that it went on to post a first-quarter return of 2.81% and a one-year return through March of 7.18%.

For now, the appeal of successful international mutual funds seems destined to attract younger, more aggressive investors rather than retirees.

That may change if international funds can show steady returns for more than a few quarters, and if the double-digit returns of large cap funds start to cool.

Some retirees may simply be beyond reach of the most clever mutual fund marketing.

In Tampa, Richard C. Hilton Sr. used to be a big believer in the potential of mutual fund investing. He soured on the funds after what he says was a bad experience several years ago buying funds through the former Barnett Bank.

Now in his late 80s, Mr. Hilton is still starting new businesses. But he has sold his mutual funds altogether and invested in annuities.

"Despite signs overseas that some funds are rebounding, I'm out of it," Mr. Hilton said. "There's no way I'm going back into mutual funds." Mr. Trigaux is a staff writer for the St. Petersburg Times and a former Washington bureau chief for American Banker.

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