-iStockphoto/Getty Images/iStockphoto
It has been a mixed year for international investors. New York, Hong Kong, and, surprisingly, London have all posted healthy gains so far in 2016. However, most of the other major world indexes are in the red.
As of the close of trading on Aug. 19, Tokyo's Nikkei 225 was off 13.1 per cent year-to-date, the Shanghai composite had lost 12.2 per cent, the Swiss SMI had shed 8.8 per cent, France's CAC 40 had dropped 5.1 per cent and the German DAX was in the hole by 1.8 per cent.
With the exception of the United States, most Canadians don't invest directly in these countries. Instead, they hold positions through international mutual funds and ETFs. In most cases, they've been losing money recently.
The iShares Core MSCI EAFE IMI Index ETF (XEF-TSX) tracks the performance of more than 1,500 stocks from Europe, Asia, and Australia. It's down 5.78 per cent year to date and 6.24 per cent over the 12 months to July 31.
The majority of actively managed international mutual funds (defined as those that invest only outside of Canada and the United States) aren't doing any better. The average return in this category over the past 12 months is minus 6.48 per cent.
However, a few funds are bucking the downtrend, and if you want some international diversification in your portfolio they should be on your radar screen right now. One is the Trimark International Companies Fund, A units.
This fund has been an outstanding performer in its category under the leadership of managers Jeff Feng and Matt Peden. It gained 4 per cent over the year ended July 31, more than 10 points better than the category average. The three-year average annual compound rate of return to that point was just over 17 per cent compared to a peer group average of 8.1 per cent. The fund ranks in the first quartile of its category for all periods from one to 10 years.
The geographic composition of the portfolio is somewhat unusual, with Britain as the top holding at 20.7 per cent (this despite Brexit). China is next at 17.5 per cent followed by Japan (8.1 per cent) and France (7 per cent).
Top holdings include Samsung Electronics (4.6 per cent of the portfolio), Anheuser-Busch (4.1 per cent) and two Chinese companies that may be unfamiliar to you: investment firm Fosun International (3.5 per cent) and liquor maker Kweichow Moutai Co. (3.3 per cent).
The current cash position is 4.6 per cent, so the managers are well positioned to scoop up bargains when they appear.
You might expect a fund with this type of geographic distribution to be higher risk. However, its beta (a measure of risk) is much lower than average. However, like all stock funds it is vulnerable in down markets. Its worst one-year performance since its launch in 1999 was a decline of 38.2 per cent over the period ended Nov. 30, 2008.
The management expense ratio is high at 3 per cent, which may turn off investors who regard such fees as excessive. However, I take the view that fees need to be weighed against results. In this case, I suggest the fund's strong performance justifies the expense.
The A units had a net asset value of $8.85 at the time of writing. Ask your financial adviser if this fund is suitable for your account.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to buildingwealth.ca.
Gordon Pape