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thoughts on a large cap international core fund with a taste for emerging markets?

David_Snowball
edited December 2013 in Fund Discussions
Hi, guys.

For the past two years I've been working with a small task force to redesign Augustana's retirement plan. We had laughably low participation rates, no incentives to participate and way too many options: all of Fido, T Rowe, TIAA-CREF, Thrivent (historically Lutheran college, and Thrivent is the successor to the Aid Association for Lutherans) and Vanguard.

We've made most of the structural changes we need: outreach, auto-enroll, auto-escalate, matching rather than a flat college contribution, agreement on a core list of funds and a proviso for a brokerage window through which the few active investors on-campus can access many more options. The core will offer Vanguard's target-date funds (sorry, Charles, but we're required to have a default option for employees who refuse to choose and we're legally safer in a target-date series than in a fixed hybrid portfolio), a number of index funds (Total Stock Market, et al) and a handful of active funds (likely PIMCO Inflation-Response, Low Duration, money market, DFA SCV and a few others).

Our core fund list (ones into which the college's contribution might be directed) does not have dedicated e.m. exposure. The argument is that we don't want to offer anything too risky in the core, though the brokerage window will make a substantial array available for folks who want it. (I actually argued for at least a multi-asset e.m. fund but I respect the decision the others reached.)

That's the background. Here's the question: are their core international equity funds that might offer better e.m. exposure than Dodge & Cox International (DODFX)? That's the currently-proposed international option for the core and it does have something like 18% e.m. The problem I'm having is that many funds which traditionally offered e.m. exposure (Oakmark International) decamped several years ago so merely looking at current e.m. exposure tells me very little about prospective exposure.

In general, the criteria are low cost, managed risk, stable firm.

Any thoughts?

David

Comments

  • TedTed
    Dear David: It appears to me that your trying to have your cake and eat it too. When entering EM into the equation you increase your risk. I like Dodge & Cox as a fund company, and think that DODFX is an excellent choice.
    Regards,
    Ted

    DODFX Exposure;(%)( d )
    Europe (excluding United Kingdom) 49.0
    United Kingdom 15.3
    Japan 12.1
    Africa/Middle East 7.1
    Pacific (excluding Japan) 5.3
    United States 5.1
    Latin America 4.7
  • msf
    I think D&C is one of the best for broad international exposure including EM. A quick search doesn't turn up many funds with current comparable commitment to EMs, let alone more.

    One you might consider, at least if you have access to the institutional share class, is AllianzGI NFJ International Value (ANJIX). Those shares have moderate cost, low turnover, and if one can forgive a really lousy 2013, a good track record. Currently 22% EM.

    Then there's Buffalo Int'l (BUFIX). Low turnover, moderate expense for an int'l fund (1.09%), same management since founding. Buffalo funds have tended to be "theme oriented" (i.e. a bit of top-down selection). Don't know if they follow that approach with this fund. Currently 20% EM.

    If you really want to boost the EM exposure, there's Forward Int'l (FFINX). Rather expensive (1.36% ER), significant turnover (92%), but 30% EM. That seems to be the "best" thing going for it.
  • David_Snowball
    Reply to @msf: Thanks! I'll look at ANJIX. Cost would preclude Forward and firm size might make the investment committee chary of Buffalo, though I do like their work.

    David
  • jonathan
    My retirement plan at work has the following foreign funds with more than 10% in emerging market exposure:
    Fund Name, (expense ratio), (EM%)
    • American Funds EuroPacific Growth Fund - Class R-6, (.5), (15%)
    • Vanguard Total International Stock Index Fund – Inst. Shares, (.12), (15%)
    We also have a dedicated EM fund, which happened to close recently and was mentioned in your December commentary, Wells Fargo Advantage Emerging Markets Equity Fund.
  • [Deleted User]
    The user and all related content has been deleted.
  • mrdarceymrdarcey
    Off the top of my head, VTRIX, ARTIX, and the previously mentioned REREX? I like DODFX too.
  • NickF
    Is there a reason the core international fund isn't an index fund? If you are trying to give people options so that people who want to make their own choices may, that's sounds completely reasonable, but I read "core" as "default" and I think it is very hard to justify anything less then extremely conventional and low cost. To me, that means Vanguard index funds, and VTIAX would fit the bill.
  • kevindowkevindow
    David, I would also consider FMIZX (15% EM, 1.17% net ER), which is managed by Philippe Brugere-Trelat who has done a fine job at MEURX and other Franklin Templeton Mutual Series funds.

    Kevin
  • STB65
    Since several of the suggested alternatives hold less than the 18% EM of DODFX, perhaps this EM lack isn't a problem. If the taper brings money back from riskier equities, such as EM, this may not be the year for more EM; and it's possible that DODFX will increase their percentage when it's appropriate. The brokerage window allows more sophisticated investors to adjust their risks as they desire. I'd look at costs as the main factor in selection. Relying on funds with individual or small groups of managers seems at variance with my concept of fiduciary responsibility for a college retirement fund, so D&C avoids that risk.
  • joe74
    edited December 2013
    Tough to argue with DODFX, but how about VWIGX? Risk profile may not fit, but 0.48% ER and 16% EM exposure. Refer to your November 2012 Honor Roll.
  • MourningStars
    Two others that come to mind- EXWAX- Manning and Napier World Opportunities (somewhat of a yesterday's hero) and MSILX (Litman Gregory Master's International ) if you could negotiate a lower minimum for Augustana.
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