August 17, 2010 - Financial markets abroad have gradually acquired greater prominence and today they account for more than half of the world’s equity market cap. Investors are now aware of this fact and over time a clear preference for international mutual funds has emerged.

Emerging market mutual funds are of particular interest because of the untapped potential of these countries as well as their growth performance. International mutual funds are the best way to explore these markets since they have the advantages of expert management, diversification and a disciplined approach.

Below we will share with you 5 top rated international mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all international mutual funds, then click here.

Sentinel International Equity A (SWRLX) seeks capital appreciation over the long term. The fund invests the majority of its assets in equity securities from foreign countries. Under normal circumstances it invests on at least 10 countries at any given point in time. Up to 40% of its assets may be invested in one country. Though it focuses on purchasing securities form developed markets, up to 20% of its assets may be invested in emerging economies. The international mutual fund returned 11.96% in the last one year period.

The international mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.60% compared to a category average of 1.40%.

Laudus International MarketMasters (SWOIX) invests a large proportion of its assets in equity securities of companies located outside the US. The fund invests in companies regardless of their market capitalization. It focuses on securities from mature economies but may also invest in developing markets. The international mutual fund has a five year annualized return of 4.5%.

The Fund Manager is Jeffrey Mortimer and he has managed this international mutual fund since 1997.

Fidelity International Discovery (FIGRX) seeks capital appreciation. The fund seeks to achieve its investment objectives be investing in securities of international issuers. It focuses on purchasing common stock and allocates funds across economies keeping in mind the size of their markets relative to the size of the entire global market. The international mutual fund returned 6.5% in the last one year period.

The international mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.07% compared to a category average of 1.40.

Scout International (UMBWX) invests the majority of its assets in prominent firms located abroad or those whose principal operations are conducted outside the US. Not more than 25% of the fund’s assets are invested in any one country. It focuses on purchasing equity securities, but may invest up to 20% of its assets in fixed-income and money market securities. The international mutual fund has a ten year annualized return of 3.32%.

As of June 2010, this international mutual fund held 87 issues, with 2.12% of its total assets invested in United Overseas Bank Ltd.

Artio International Equity A (BJBIX) seeks capital growth over the long term. The fund primarily invests in equity securities issued by foreign companies from various market sectors. At least 65% of its assets are invested in not less than three foreign economies. Up to 35% of its assets may be invested in developing countries. The international mutual fund returned 7.59% in the last one year period.

The Mutual Fund Manager is Rudolph-Riad Younes and he has managed this international mutual fund since 1995.

To view the Zacks Rank and past performance of all international mutual funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/source: www.zacks.com

Mr Vicky Mehta, senior research analyst, MorningStar India, takes you through the labyrinth of MF investments in this column.

I had invested in 1,800 units of GIC Balance Fund under Dividend Plan in 1992. Later, Canara Bank, which is now operating as Canara Robeco, took over. On January 18, 2010, it declared a 70% dividend, but refused to pay me saying that these were held under investment plan since inception. Can a fund change the mode of plan (from dividend to investment) without the holder’s consent? Please advise.
Ratnapriya Ghosh

When GIC Balance Fund migrated to the erstwhile Canbank Mutual Fund, the investors were required to choose between growth, dividend payout or dividend reinvestment plans. In its communication, the fund house had stated that if investors fail to make a choice, the growth plan would be treated as the default choice and such investments would be classified under the growth plan. Perhaps, in your case too, the failure to make a choice may have resulted in investments being classified under the growth plan.

I am a 64-year-old senior citizen drawing a monthly pension of Rs 17,700. I have invested in Reliance Equity Opportunities Fund, Reliance Vision Fund, HDFC Monthly Income Plan, HDFC Prudence, apart from post office monthly income scheme and senior citizens’ savings scheme. Rentals also contribute to my income stream. Please review my portfolio.
SC Jain

Your portfolio has a mix of assured return schemes and market-linked investment avenues (mutual funds and stocks) which is certainly positive. If you are a risk-taking investor and can take on the risk associated with market-linked investments, the portfolio seems fine. If not, you may want to consider realigning the portfolio and make a higher allocation to assured return schemes.

I have investments in four mutual funds — Reliance Regular Savings, SBI Magna Contra, UTI Opportunities and UTI Dividend Yield — through SIP route. Since these investments are over a year old, I plan to sell them and switch to other funds. Please advise.
Melwyn D’Souza

In case of investments made via the SIP route, the exit load is computed from the date of each instalment and not the date when the first instalment was invested. In terms of performance, Reliance Regular Savings–Equity and UTI Dividend Yield enjoy a 5-star rating from Morningstar, while Magnum Contra and UTI Opportunities have a four-star rating. These ratings indicate that the funds have delivered an impressive showing on the risk-adjusted return front vis-à-vis peers. As regards thematic funds like infrastructure funds, it isn’t uncommon for them to be at their best in time periods, when the underlying theme hits a purple patch.
source: www.blogger.com

Here is a roundup of news from Indian newspapers, news wires and Web sites on Monday, August 2, 2010. The Wall Street Journal has not verified these stories and does not vouch for their accuracy.

Survival of Many Fund Houses in Danger:

First, there was outrage. Then, there were outflows. A year after the Securities and Exchange Board of India (Sebi) decided to ban entry load, the mutual fund industry’s equity assets are down by Rs 8,000 crore (net outflows), according to data from the Association of Mutual Funds in India (Amfi). (Source: Business Standard)

Eight Die as Valley Stir Worsens:

Even as the embattled Omar Abdullah government tried to grapple with worsening street protests, four people were killed in a blast at a police camp in Khrew in Pulwama district, with at least 35 others injured, after a fire triggered by protesters reached the armoury where explosives recovered from terrorists were stored. (Source: The Times of India)

Games OC Has ‘Proof’, UK Mission ‘No Recollection’:

The Indian High Commission in London has been left trawling through a vast cluster of emails after its junior clerk Raju Sebastian said he had “no recollection” of having recommended a British firm that received nearly a quarter of a million pounds from the Commonwealth Games Organising Committee (OC). (Source: Hindustan Times)

Haryana IAS Officers Become Members of Corporations They Head, Buy Flats Cheap:

Several IAS officers picked up apartments at concessional rates in prime locations in Haryana by becoming members of the employees welfare associations of the very corporations they were heading while on deputation.(Source: The Indian Express)

Centre to Expand PDS Cover:

In a move that will have a major long-term implication, the Centre plans to expand the coverage of Below Poverty Line (BPL) population under the public distribution system (PDS) to 8.07 crore (or 80.7 million) from the current 6.52 crore based on the acceptance of the Tendulkar Committee’s poverty projections for 2011 by the Planning Commission. (Source: The Hindu)

Dissenting Former DoT Secretary to Depose Before PAC:

The deposition of DS Mathur, former telecom secretary, who even refused to sign any files on the matter till his retirement on December 31, 2007, could come as an embarrassment for Raja who is drawing flak for allegedly causing huge losses to the exchequer by giving out the valuable licences for a song to eight new players in January 2008.(Source: The Financial Express)

Bihar Sees Reverse Brain Drain:

The unprecedented reverse brain drain to Bihar is being led by people who never imagined they would return. Prakash, 42, has been in Patna for two years now, but on the day he had left the city in the early 1990s for Australia, he hadn’t at least thought so.(Source: Mint)

source: blogs.wsj.com

AUGUST 2, 2010

The debate over active versus passive funds has gotten a lot of attention. But what should investors do when it comes to passive versus passive?

More and more options are becoming available to investors who want a fund that tracks a particular market benchmark, as companies expand offerings of index mutual funds and exchange-traded funds. In fact, indexing giant Vanguard Group recently announced plans to add an ETF share class for its flagship index fund, Vanguard 500 Index. It's also launching 19 new index portfolios with both mutual-fund and ETF shares.

So how should investors decide between traditional funds and ETFs? There are a few important points to keep in mind. Many ETFs are cheaper than traditional funds, thanks to the advent of commission-free trading—and a recent price war among providers. ETFs also offer some important tax advantages.

But there are renewed concerns about ETFs after the May "flash crash" saw the prices of some ETFs fall far more than the value of their underlying holdings. First-time ETF investors should also be sure they understand that ETFs trade throughout the day instead of just once, like mutual funds—and that can carry some risks.

As for performance, the two types of funds haven't diverged greatly. Index mutual funds that track the Standard & Poor's 500-stock index are down an average 7.30% for the three-year period through July 26, while ETFs tracking the same index are down 6.97%, according to Morningstar Inc. Similarly, index funds tracking the Russell 2000 small-stock index are down 5.01% while ETFs are down 4.21%, and index funds tracking the MSCI EAFE foreign-stock index are down 10.54%, while ETFs are down 10.02%.

Here's a closer look at the big differences between index ETFs and traditional index funds.

Expenses

When deciding between ETFs and funds, "the first consideration should be about costs," says Paul Justice, director of ETF research for North America at Morningstar. "The fee is going to alter your returns over longer periods of time to a meaningful degree."

Here, ETFs almost always win: The average expense ratio for all ETFs in the U.S. is 0.54%, compared with the 0.99% average for all conventional index funds in the U.S., according to Morningstar. Consider one of the largest funds that tracks the S&P 500 and a comparable ETF. Vanguard 500 has an expense ratio of 0.18% for retail shares, compared with a 0.09% expense ratio for the SPDR S&P 500 ETF.

ETFs didn't always have such a big price advantage. In fact, the trading fees investors paid for buying and selling ETFs used to be one of the big marks against them. But now "there's an emergent price war in ETFs," says Matt Hougan, editor of IndexUniverse.com.

It began last November, when Charles Schwab Corp. entered the ETF market with four funds that featured no commissions for Schwab investors who trade online at Schwab. Currently, Schwab offers all eight of its stock ETFs commission-free for those investors. Three Schwab bond ETFs will be available for trading later this week, also without commissions for Schwab account holders trading online.

Other firms followed earlier this year with no-commission deals of their own. Vanguard began to offer all of its ETF share classes commission-free for its brokerage clients, and the new Vanguard S&P 500 ETF will have a 0.06% expense ratio. Fidelity Investments teamed up with BlackRock Inc.'s iShares unit to offer 25 iShares ETFs commission-free to Fidelity retail clients, in addition to its commission-free Fidelity Nasdaq Composite Index ETF.

Trading Flexibility

Another big difference between ETFs and traditional funds is how they trade. ETFs can be bought and sold throughout the trading day, while traditional funds are priced and traded only once a day. The flexibility of ETFs may suit investors interested in short-term trading or who want to liquidate a holding quickly. But that flexibility adds an element of uncertainty and complexity for investors: Prices are set by buyers and sellers in the marketplace, and they sometimes deviate from the ETF's net asset value, or the value of its holdings.

With a mutual fund, by contrast, "you're going to get the calculated NAV at the end of the day when you buy or sell, and you remove that premium and discount risk," says Mr. Hougan of IndexUniverse.com.

The result, says Morningstar's Mr. Justice, is that "trading an ETF is slightly more complicated than a mutual fund." For instance, experienced ETF traders often use limit orders, which means a trade will be executed only within a specified price range. Some ETF traders also tend to avoid buying and selling at the very beginning and the end of the trading day, when prices can be more volatile.

The market prices of large, widely traded ETFs tend to stick close to net asset value. Divergences are more common when the securities that ETFs hold are less heavily traded, such as with many corporate bonds.

Still, Fran Kinniry, a principal in Vanguard's investment strategy group, says over the long run, premiums and discounts "tend to wash themselves out," allaying some of the concerns for investors who plan to buy and hold ETFs for years.

Mr. Kinniry thinks a bigger distinction between index mutual funds and ETFs is where they're bought and sold. Investors who aren't used to buying from brokerages might prefer to stick with traditional index mutual funds.

Tax Efficiency

Another plus for ETFs: These funds are "more tax-fair and more tax-efficient" than even their index mutual-fund counterparts, says Mr. Hougan.

When ordinary investors decide to dispose of an ETF investment, they sell the shares to others rather than redeeming them with the fund. That eliminates a tax issue that mutual funds face: When a fund needs to sell securities to meet redemption requests, it must distribute the resulting net taxable gains to all the fund's investors.

The result: ETF investors get fewer or no distributions of gains realized by the funds. For example, Morningstar data show that none of the ETFs that track the S&P 500 or the Russell 2000 had a capital-gains distribution in 2009. In contrast, the average distribution for conventional U.S. index mutual funds that track the S&P 500 was 0.36% of net asset value, while index funds that track the Russell 2000 had an average distribution of 0.25%. "Almost the only way to generate a capital gain in an ETF is if there's an index change and the fund has to sell securities to meet that index change," Mr. Hougan says.

In essence, ETFs give investors control over their own tax issues, says Noel Archard, managing director at iShares. "With an ETF, you're truly picking up your own tab and doing it at your own rate" and aren't affected by the actions of other investors in the fund.

Ms. Prior is a staff reporter for The Wall Street Journal in New York. She can be reached at anna.prior@wsj.com.
source: online.wsj.com

Written by Pauline Beart on 01 Aug 2010

Those jittery about paying the effectiveness of the fee charged on investment in mutual funds should exhale a sigh of relief.

The so called 12b-1 fee charged under them is deemed to be vexing by many fund investors.

This fee can include the costs of compensation for brokers, advertising-related costs, in addition to service costs like mailing quarterly fund disclosures.

As a beginning, Securities and Exchange Commission seeks to eradicate its preposterous name that it bears. However, if the official approval is given following a 90-day public comment period, the rules will introduce a radical transformation in the way investors purchase funds.

The vital changes highlighted under the overhaul is that the sales fee that long term investors are obliged to shell out would be done away with. Following the approval, they can resort to pay more than if they had already paid for upfront sales charge or “load,’’ when they entered the fund.

In addition, the brokers would be able to charge fee as per his wish. Hence, the competition is likely to rise as a result.

Besides, fund disclosures will be made mandatory in a view to discern the difference between what investors pay to brokers in name of ongoing sales charges, and what they are charged for marketing and services.
source: frenchtribune.com

By KEVIN KINGSBURY And JOHN KELL

Money returned to long-term U.S. mutual funds last month after investors pulled holdings out in May in the wake of the stock market's "flash crash," the Investment Company Institute said in data released Thursday.

In stock funds, more money continued to be pulled than was added, continuing a trend in which investors haven't consistently added to stock funds even since the market bottomed in March 2009. Outflows, or selling, dropped to $5.41 billion in June from $24.76 billion a month earlier as money leaving domestic funds last month more than offset net inflows to those that primarily invest overseas.

Instead, the bulk of cash going to mutual funds since then has been bond funds. In June, they received a net $20.74 billion, said the industry group, up from $14.54 billion in May. They rose 58% for taxable funds to $18.79 billion but dropped 27% for municipal-bond funds.

Money continues to flow from money-market funds as interest rates for such instruments remain near zero. Outflows rose to $24.15 billion from $22.16 billion, putting the first half's total at $509.27 billion, said the ICI. That compares with outflows of $189.37 billion in the first half of 2009.

Meanwhile, for the latest week, assets in money-market funds jumped $3.57 billion as inflows into institutional funds more than offset a decrease in retail funds, according to the ICI.

For the week ended Wednesday, total fund assets grew to $2.802 trillion, according to the ICI. Earlier this year, the total funds tracked by the ICI dropped below $3 trillion for the first time since October 2007.

Retail funds decreased $2.37 billion, to $980.36 billion in the latest week. Taxable government funds saw $990 million of inflows, putting assets at $173.58 billion, while nongovernment funds had $1.86 billion of outflows, lowering the money in them to $597.07 billion. Tax-exempt funds declined $1.5 billion to $209.71 billion.

Assets in the institutional class were up $5.94 billion to $1.821 trillion. Taxable government funds had $10 million of outflows, putting asset levels at $662.88 billion. Nongovernment funds had inflows of $7.56 billion, moving their assets up to $1.025 trillion. Tax-exempt funds had outflows of $1.62 billion, falling to $133.27 billion.

Write to Kevin Kingsbury at kevin.kingsbury@dowjones.com and John Kell at john.kell@dowjones.com
source: online.wsj.com