International Intrigue

between the fund’s performance and the benchmark index. Foreign stock funds rely more on economic developments outside of the United States.

To make sure that our list wouldn’t lean too heavily on the U.S. market, we scratched off funds with an r-squared of 50 or higher. In the end, we found a group of seaworthy picks that could help you add a bit of international flavor to your portfolio.

You’ll note that our list includes a number of funds that invest in small- and midcap stocks. Those two segments of the global stock market include a large number of companies that don’t make it to the S&P 500 roster and firms whose results probably won’t track the U.S. economy very closely. Oakmark, a Chicago-based money management firm, manages the top two funds on our list. The Oakmark International Small Cap I fund’s (OAKEX) results have been volatile over the years–the fund slumped 8.9% in 2000. Still, the Morningstar rating for its cousin, the Oakmark International fund (OAKIX), is four stars. Third place went to an interesting fund: the Tweedy, Browne Global Value fund (TBGVX). To best protect returns, the managers at Tweedy Browne invest by hedging contracts to make sure that fluctuations in the U.S. dollar don’t bruise gains made in stock markets overseas.