Portfolio Manager Perspectives

Jeff Benjamin

'Buy American' not the hottest investment strategy: Franklin PM

Home country bias may be comforting, but it will make you poorer, says Rostom

Mar 14, 2012 @ 11:40 am

By Jeff Benjamin

It may not come as any big surprise to hear a manager of an international fund describe “global as the new core.” But there is a lot of logic behind the argument made by Par Rostom, manager of the Franklin International Growth Fund Ticker:(FNGAX).

“We know that there is a home country bias for most investors,” he said. “That bias for safety might help you sleep better, but over the long term, it will make you poorer.”

Mr. Rostom, who has managed the fund since it was launched in 2008, pointed out that if a person were truly investing for best-of-breed stocks across all categories, “it is highly unlikely you will be able to find all those names in your home country.”

Mr. Rostom's passion for going after the best opportunities is illustrated in the way he will disregard the weightings of his benchmark MSCI EAFE Index.

His fund, which is still small at just over $50 million, has gained 12.3% from the start of the year, which compares with an 11.4% gain for the index.

The growth fund, which has a four-star rating from Morningstar Inc., has outperformed the benchmark in each of the past three years.

Some examples of how this bottom-up strategy leads Mr. Rostom beyond the parameters of the benchmark include a paltry 2.5% weighting in Japan, which compares with a 20% weighting by the benchmark. But when it comes to Asia excluding Japan, the fund's 30% weighting is more than double that of the benchmark.

Mr. Rostom also has a 10% allocation to emerging market stocks, which are not included in the MSCI EAFA.

In terms of Europe, where Mr. Rostom has a 37% weighting, compared with a benchmark weighting of nearly 50%, he said he has “large exposure to Northern Europe, outside the trouble spots.”

The portfolio of just 40 names has an impressive 16% average annual turnover rate.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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