US Global Investor Funds are Evolving

Global funds are mutual funds made up of firms headquartered outside of the United States versus local funds which are those funds concentrated on American domestic firms. At different times, it has been better to invest domestically or internationally though most of the time it has been more profitable to invest in the former. However, we may be in a time period when investing in the global funds may be more profitable.

Themes that drove the US economy so strongly and pushed local funds to regularly outperform the global funds are now practiced internationally. Even in the union-dominated labor forces of Europe, greater productivity is being squeezed out of the workers where it wasn’t before and lessening government regulations are encouraging competition in the European economy that, in turn, encourages consolidation of European firms. Consolidation ultimately brings a greater efficiency as the larger companies are able to exploit economies of scale. Sound familiar? Think about the booming United States economy in the 1990s.

Asian funds have been taboo investments since the market collapses after the US tech bubble burst in 2000-2001. These economies are now “righting the ship” and emerging from the doldrums. China is evolving from a centrally planned economy to a capitalist market economy as it seems to have learned when gaining full rights to Hong Kong from the UK in 1998.

With market globalization the ultimate buzzword of the modern economy what’s a global fund doesn’t really mean the firm’s focus of business is outside of the United States. Global funds today are “global” in the sense they operate globally with significant revenue portions coming from all over the globe. An excellent example of this is Porsche, the world’s most profitable automobile manufacturer, which is headquartered in Germany but its largest market is in the United States, accounting for 40% of annual sales.

Ultimately, global funds look to perform well as tried and true American market efficiencies take root in other parts of the world. This is not to say local funds will perform poorly but investors should at least look into diversifying their mutual fund portfolios by investing in global funds.

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