Jan 20, 2017
Personal Investor: Own the world with international equity funds
By Dale Jackson
The merits of mutual funds can be a hot topic for debate, but when it comes to diversifying your investment portfolio there are few substitutes for international equity funds.
We can replicate, or even outperform, U.S. or Canadian equity funds by purchasing stocks directly on North American exchanges. Buying stocks outside Canada or the U.S. is not so easy. Even if it was, searching the world for the best bargains is beyond the resources of most Canadians who have – like – jobs.
Even exchange-traded funds don’t have the ability to review the financials statements of a South Korean fast-food chain, or a Brazilian sportswear manufacturer. We need a hands-on management team to do that, and that’s where international equity funds can shine.
The benchmark for international equity funds in Canada is the MSCI Europe Asia Far East total return index in Canadian dollars. In 2016 the index fell two per cent.
During the same year the average return for the 220 international equity funds available on the Canadian market was minus 2.6 per cent after fees. That’s pretty good considering the cost of running an international equity fund can drive annual fees (MER) to three per cent.
However, returns vary for 2016 and across different timelines. The best performers in 2016 could be the worst performers over a five-year period, and the best long-term performers could have had a bad 2016.
When it comes to international equity funds, management matters.
