Founders launches overseas-only fund

MUTUAL FUNDS

January 21, 1996|By BLOOMBERG BUSINESS NEWS

DENVER -- Money manager Michael Gerding is betting that investors will want to place more money outside the United States this year.

"Economies overseas will be better in 1996 than in 1995," said Mr. Gerding of Denver-based Founders Asset Management Inc. "Earnings are better and interest rates are coming down."

To that end, Founders Asset Management has launched a new overseas fund, Founders International Equity Fund.

Mr. Gerding, 33, calls himself a grandfather of international investing, since he's been playing overseas markets for the past 11 years.

He's also one of the more successful international mutual fund managers around, judging by the performance of his two existing funds.

Founders Worldwide Growth Fund, a $237 million global fund, ranked in the top fifth of all global funds last year, according to Lipper Analytical Services.

Since the fund's inception at the end of 1989, it has been No. 1 among all global funds, returning 21 percent a year on average, about twice the average performance of its peers.

Founders Passport Fund, a $58 million small-cap international fund, was the best-performing international small-cap fund last year.

Since Passport's launch in November of 1993, it has returned a cumulative 17.29 percent, while the average fund has returned a cumulative 2.06 percent.

The new fund will be more diverse than the Passport fund, since it will invest in both large and smaller companies. It's also designed to appeal to investors who want a pure overseas play, since unlike the Worldwide fund, it won't take stakes in U.S. companies.

The timing for the fund seems promising.

In the week ended Jan. 3, investors poured a net $1.1 billion into international funds, the highest level in almost two years, according to AMG Data Services, which tracks fund buying and selling.

The new fund has about $1.1 million under management. While Mr. Gerding wouldn't comment on particular stocks he wants to buy, he said the fund will invest in companies in the same countries where he is buying stocks for his two other funds.

Like many international managers, Mr. Gerding said Asia seems particularly promising this year.

"In Japan, more and more companies are seeing earnings grow again," he said, and in the past three months the Nikkei 225 index has climbed about 15 percent. His picks there are skewed toward technology-related companies, although he also owns stock in telecommunications, auto and data processing companies.

Mr. Gerding also is buying more stocks in Hong Kong, Malaysia, Korea and Indonesia.

And he is bullish on Latin America, with the exception of Mexico, after a difficult 1995, in which Mexico's bolsa index tumbled 22.87 percent in dollar terms, Peru's general stock market index dropped 17.31 percent and Brazil's Bovespa index fell 14 percent.

His global fund has about 8 percent of assets in Latin America now, compared with about half that much last year, and he has been buying stocks in Argentina, Chile and Brazil.

In Europe, he's keen on the Czech Republic and Hungary. In the first three weeks of the year, the Hungarian stock market is up 14 percent in dollar terms, and the Czech Republic stock exchange has climbed almost 5 percent.

"The Czech Republic is a gateway to central and eastern Europe because of its history," Mr. Gerding said.

Indeed, Czechoslovakia (especially the area that is now the Czech Republic) was the most economically developed country in the region before the Communists seized power in 1948.

The economies of both countries are turning around. Inflation in the Czech Republic is under control, with the annual rate in 1995 at 7.9 percent, down from 10 percent in 1994.

Hungary has reduced its foreign debt and mastered a successful round of state sales of companies in 1995.

Central Europe and Turkey should also benefit from new investments.

"Emerging markets are getting money again," said Mr. Gerding.

Mr. Gerding's interest in some other European countries has been dampened, and the Worldwide fund now has about 50 percent of its assets invested there, compared with about 60 percent in the middle of last year.

The German economy "has hit a wall," and the December strikes in France depressed the Gallic economy.

Mr. Gerding is still bullish on southern Europe, however. "The economies there are accelerating very nicely, and inflation is coming down."

He also expects Britain's economy to continue to grow, albeit at a slower rate than the 2.1 percent it grew through the third quarter of last year.

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