Taking your RRSP abroad
Top foreign picks for your RRSP
Last week, many quality Canadian funds were noted as worthy choices for this year's RRSP contribution. This week, we shift gears and review a list of funds investing abroad that are worthy of your investment dollars.
Global stock funds
Global stock funds invest all over the world, so if your portfolio already has plenty of North American stock exposure (like many portfolios do) you may want to think twice about adding a global fund to your existing mix.
However, global funds can be a great way to simply get broad-based exposure to the world since they're typically light on Canada but with a significant chunk in U.S. stocks. Hence, all of your foreign stock exposure can be rolled into any one of the better global funds available today.
Brandes Global Equity is the relatively new fund launched by Brandes Investment Partners and Co. last summer. From late 1994 through the spring of 2002 they managed the AGF International Value to a terrific performance record. Their brand of value investing is true to the teachings of Ben Graham and David Dodd (the fathers of value investing). They're an excellent firm.
Mackenzie's Cundill Value fund is perhaps the "strictest" of its value-oriented peers. Don't be scared off by its high Japanese weighting of nearly half. When I spoke with lead manager Tim McElvaine last May, he said that fully half of Japan's total debt was held by just over three-dozen companies. His selection of companies with low debt and ultra-low stock prices reduces risk in his opinion. Further, McElvaine hedge virtually all of the currency exposure in the fund.
Other global funds worth consideration include AGF International Value, Saxon World Growth, Synergy Global Value, Synergy Global Growth, Templeton Growth, Templeton Global Smaller Companies, and Trimark Fund.
International stock funds
This group of overseas stock funds is ideal for the North-American-heavy portfolios.
Mawer World Investment is my top choice in this category. Its ultra-low fees, quality and depth of management, value-orientation, and strong record of past performance make this an ideal addition to most portfolios - that is assuming you don't already own a big-cap fund investing globally, in Europe, or in overseas countries.
Templeton International Stock is a good long-term performer that has been battered lately. Its holdings in re-insurance and telecom stocks were to blame for its poor returns last year. However, manager Don Reed's collection of roughly 80 stocks have a common theme - they're fundamentally cheap. Reed loves to cite Nippon Telephone and Telegraph to illustrate both the type of opportunity he loves to find and to explain the fund's overweight in Japan. NT&T is Japan's largest phone company but trades at a price that is equal only to its 64% ownership in NTT DoCoMo - NT&T's mobile phone division and itself a publicly traded company. While the Japan story hasn't changed in many years, Reed says there is less risk in buying such cheap companies, even if it requires a lot of patience. This fund is due for a reversal of fortune.
Other quality overseas stocks include AGF International Stock, Brandes International Equity, and Trimark International Companies.
Global bond funds
Fidelity American High Yield and Trimark Global High Yield are two funds worth checking out based on my view that corporate and high yield bonds are overvalued today.
Both funds use diversification to reduce risk and are run by firms best known for their rigorous company research and stock-picking prowess. Having the resources to know a company both from the viewpoint of a bond and stock manager adds a lot of value in this specialized arena.
Caveat: Prior to loading up on one of these fine high yield funds, be sure to check within your existing bond funds and other holdings to determine what level of high yield exposure you already have. It's a good place to be in my opinion but as the saying goes, everything in moderation.
I also normally provide a list of specialty equity funds but not this year. While I still think that they merit a place in many portfolios, the fact is that most investors fail to make effective use of such funds. Since most investors wait for good performance to happen before making a purchase, they totally miss out on the greatest potential of such funds.
That said, I hope this and last week's article provide some food for thought as you look for potential candidates before March 3, 2003 - the deadline for RRSP contributions to be credited to 2002.
Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and provides independent investment research to financial advisors. He can be reached at email@example.com
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