The S&P/TSX Composite index is down over 4% so far this year. Meanwhile the S&P 500 is up over 5% in Canadian dollar terms. Other world markets, including Brazil and New Zealand are up even more.
Investors with higher risk appetites may choose to diversify beyond North American markets but may not have the resources, means, ability or know-how to navigate each local market. For these investors, an international fund might make sense.
Last week, we talked about five global equity funds that had the potential to outperform. Funds in the global category must invest more than 10% and less than 90% of their portfolios in Canada or the US, and the rest in any other country.
Those looking for more further diversification in countries in which they invest could look at the International Equity category. Funds in this category must invest most of their equity assets in countries other than Canada and the US.
This week, we take a look at the international equity mutual fund category, profiling funds that have a Gold-medal rating under Morningstar’s quantitative rating system. The forward-looking rating picks funds that are likely to outperform in the future, based on various metrics including price, portfolio and performance.
There are 815 funds in the international equity category, of which 189 are medalist funds. Of these, 29 are Gold-rated.
Here are five of the Gold-rated funds:
Name | Morningstar Rating | Quantitative Rating |
10-Year Total Return |
|
Sun Life MFS InternationaI Value F | 5 | Gold | ||
CI International Value Class F | 5 | Gold | 8.69 | |
Fidelity Intl Growth Sr F | 4 | Gold | 8.42 | |
CI Select Intl Equity Mgd Corp CL F | 4 | Gold | 7.91 | |
Capital Group International Equity Cdn F | 4 | Gold | 7.77 | |
Source: Morningstar. Data as of Oct. 31, 2018 |
Sun Life MFS International Value F
Sun Life MFS International equity is a five-star, Gold-rated fund that has close to $560 million in assets. The fund has a high sustainability rating. The fund has close to 60% of its portfolio in Europe, of which developed Europe accounts for 47.59%. It has close to 10% of its portfolio in emerging Asian stocks, and a little over 10% in Japan. The fund is heavily overweight in consumer defensives, technology and healthcare sectors, and is underweight on financial services and consumer cyclicals. Its top five holdings account for almost 18% of its portfolio.
Fidelity International Growth fund has four stars and is Gold-rated. Over the past 10-years, it has returned around 8.42% annualized, above the category average of 7.02%. The fund has a higher than average standard deviation. A little over 24% of the portfolio is in US equity, well above the category average of 4.35%. It has around 35% of its holdings in developed Europe, 9.3% in the UK, and a little over 15% in Japan. It is overweight on Africa and the Middle East, with 2.23% of its holdings invested in stocks in that region, as against a category average of 0.56%. The fund is overweight on technology, industrials and financial services, and underweight on consumer cyclicals. Since 2013, it has been managed by Jed Weiss.
Capital Group International Equity Cdn F
Capital Group International Equity Cdn has four stars and is Gold rated, with 95% of its portfolio in international equity. The fund is overweight on Asian emerging markets stocks – it has close to 18.7% invested in the region, as against a category average of 4.15. It is underweight its category allocations on developed Europe, investing close to 30% in the region as against a category average of close to 43%. It has average risk as compared with its category but has delivered higher returns. The fund is overweight on technology and is underweight on industrials and consumer defensives. It is the cheapest fund on this list, with expenses of 1.05%.
CI International Value Class F
CI International Value Class F is the second five-star, Gold-rated fund on this list. The fund has low risk, as compared with its category, but has above average returns. Over 10-years, it had returned 8.69% annualized, as against its category, which has returned a little over 7%. It invests a little under 13% in US equity, and also has a 1.1% allocation of its portfolio to Canadian equity. It is underweight on Europe, compared with its category, and is overweight on Japan and emerging Asia. The fund also has a high sustainability rating. The fund is significantly overweight on financial services and is underweight on consumer defensives. Since 1998, it has been managed by John Hock.
CI Select Intl Equity Mgd Corp Cl F
CI Select International Equity has four stars and is Gold-rated. The fund has below average standard deviation and has above average returns. It has over 14% of its portfolio in emerging Asian stocks, as against a category average of a little over 4%. It also has close to 5% of its portfolio in Latin America, as against a category average of 0.7%. It has over 250 holdings, and the top five holdings account for close to 10% of its overall portfolio. The fund is overweight on financial services, technology and healthcare, and is underweight on consumer defensives and industrials.