Overseas Investment Turns Profit for Funds
Mutual fund shows growth in looking abroad
To money managers like Paul Wick, ``thinking globally'' is not just good politics. It can also result in profit.
Mr. Wick is co-manager of the Seligman Henderson Global Technology Fund, a mutual fund introduced May 23. With assets of some $9 million on hand, the global fund invests in technology stocks from North America, Britain, continental Europe, Japan, the Pacific Basin, and Latin America.
For Wick, the global technology sector represents a potentially lucrative market. Case in point: Revenues from the world telecommunications market could increase by 40 percent to more than $850 billion by the end of the century, he says.
Mutual fund experts note that new global funds - such as the Seligman Henderson Global Technology Fund - are being created because of the rising demand by United States investors to buy overseas stocks. ``International stock funds have been doing very well this year,'' says John Collins, a spokesman for the Investment Company Institute, a Washington-based trade group.
For the first four months of 1994, US investors poured billions of dollars of new money into international stocks, although at a slower pace than in late 1993. During the four-month period, net assets in international funds grew by $13.4 billion, compared with $3.4 billion for the first four months of 1993.
The total net cash inflow of $13.4 billion was roughly one-half the amount of new money ($26.3) going into international funds in all of 1993.
Moreover, international stock funds are being created at a faster clip than domestic US mutual funds. At the end of March 1994, there were 213 international funds, compared with 152 funds at the end of March 1993. During that year, international funds increased by 40 percent, says Mr. Collins, compared with a gain of 18 percent for all stock mutual funds.
Categories of mutual funds are defined in different ways. Thus, a ``global fund,'' such as the Seligman Henderson Global Technology Fund, would not be considered strictly an ``international fund'' by all stock market technicians, since its portfolio includes US as well as overseas issues. But the new fund illustrates the growth in mutual funds that offer investors the option of investing abroad, as well as within the domestic US market.
Currently, several major global stock-market indexes are posting upward trends, says Dennis Jarrett, chief technical strategist for Kidder, Peabody & Co., an investment house. Countries showing potential for rising markets, he notes, include Denmark, Greece, Portugal, Spain, and Switzerland.
Overall, economic growth patterns are also looking good. The global economy could expand by as much as 2.8 percent during 1994, up from 2 percent in 1993, says David Rolley, an economist with DRI-McGraw Hill, an economic consulting firm in Lexington, Mass.
But while Europe and East Asia appear to be poised for continued economic growth, parts of the developing world are expected to lag, economists note. In recent months, many investors have been pulling back from stock funds linked to emerging markets, in part because of rising interest rates in the US, but also because of a shakeout in the global bond market that has adversely affected some developing nations.
Still, US investors are expected to keep pouring money into overseas funds in 1994, although at a slower pace than late 1993.
``Diversifying [some assets] into overseas stocks makes good financial sense,'' says Thomas O'Hara, chairman of the National Association of Investment Clubs, based in Royal Oak, Mich.
Wick says global technology stocks have the potential for above-average market returns over time. He says he likes the climate for technological development in Germany, France, Britain, and Italy, among other nations. Wick also manages the Seligman Communications and Information Fund, which was rated by Lipper Analytical Services as the top-performing mutual fund in the science/technology sector for the 10-year period ending Dec. 31, 1993.