Alec Lucas (Morningstar, FMIJX)


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Joining us on the line now is Alec Lucas from Morningstar. You talk about a mutual fund today and Alec thank you for joining us. Now we're talking about the FMI international fund is that right. That's right yet the focus portfolio of more adverse foreign large blend category here recently. Reopened to new investors since April is closed last may very capacity conscious. Hi active chair. Very high bar for. Stocks that are in the portfolio good risk adjusted results. Looking at this portfolio what makes them unique what makes them stand out against their competition. Well it is the focus on. You know roughly 25 to 35 or so stocks. In the portfolio makes it stand out from the benchmarks the big thing to know about despondent investors have to pay careful attention to it that it edges it. Currency exposure he took it holds us stock or preferred shares that trade and currency other than US dollar civil heads that currency exposure back to US dollars. Over the very long term hedging it actually. You come out of bed head by hedging with less volatility but he can lead to. Either each kill and the performance over a one year period or a big headwind. Encountered headwind and went seventeen for its results. Relative to an edge peers look poor but if you factor in the fact that it had just its currency. On the did have a great year and went seventeen but but but perfectly good result. And and some senses the seeming down here between seventeen creates an opening for investors who understand what they could get with it on. Looking at this fund obviously it's an international funds are gonna have holdings from all over the world but is there any place in particular that they tend to focus on most frequently. Yeah it's great question they've focused primarily on developed markets. Multinational companies. They went through a process of batting. Accounting practices that all kinds of the investor protections across the globe. And are very reticent about investing companies don't weld and mainline China. As well but Russia that you won't see firms. From those countries in the portfolio. That distinguishes it from a lot of international fund. So that's another distinctive in addition to currency hedging. A lot of international funds will have significant holdings in China. So it if you already have an international allocation in your portfolio but you want something distinctive it's going to get something different. It's very different in and I would face three respects one as the focused portfolio to is the currency hedge and three is the avoidance of stock. Domicile in China. Alec looking at this fund obviously it sounds like there's you know it's it's a fairly unique fund would you pay in terms of expenses. For the privilege of investing in. Yet the expenses relative to actively managed peers are competitive stable. Expense ratios of both the app on my international the institutional shares break in the second cheapest and help those 77 basis points for the that's a mine institutional or the minimum 400000 dollars. The retail shares were much more modest than minimum investment of 2500 dollars and paid 91 basis points per year or zero point 91%. And that ranks of below the peer group beat. Good Alex thank you again for joining us today we appreciate it. Alec Lucas from morning start talking about the FM RI international fund the ticker on that if you do want to look it up. Is FM. IJ acts you know I usually don't. Pay for the hedging a I usually just if on them invest internationally but I do with the currency risk being in because. You pay for that privilege if you want to fund you do it is that it there's Costa. You have to understand that when you buy an arm on the other thing is remember that the hedge don't always necessarily work in your favor if you have a year like last year where the dollar weakened significantly in their heads differently. You wind up with a year of underperformance of this fund compared to its category in the last year it underperformed by about 10%. However if you look at this fund over the last decade OK don't back to a rather since its inception in 2011 and its outperform by about 40% so it's you know it. In some cases like eight cents to but then again it's it's an interest in portfolio for an international investor because it's so concentrated. In a small number of stocks.