“Boots on the ground” debunked

Every single wholesaler whose ever come to pitch me an international portfolio has made the case that having “boots on the ground” – meaning analysts located in overseas locations – would lead to outperformance relative to both the indices as well as the other foreign stock funds that maybe had less of these boots on the ground.

It doesn’t really work that way though. I do believe in the idea that overseas markets are, in general, less efficient than those here at home – if only for the reason that there are less people picking over these stocks than we have on Wall Street. They can also be less mature, less regulated markets and, as such, have more opportunities for savvy analysts and PMs with an information asymmetry to maneuver. Unfortunately, even while this may be true, none of it manifests itself in the form of outsized performance that is any way persistent or broad-based.

Actively managed international stock funds are every bit as unlikely to consistently outperform as their US counterparts.

Here’s S&P’s take, via two data points from their mid-year 2014 SPIVA Scorecard:


  • On the international front, approximately 70% of global equity funds, 75% of international equity funds, 81% of international small-cap funds and 65% of emerging market funds underperformed their benchmarks over the past one year.
  • For the first time since adding the International Equity category to the Scorecard, the report witnessed the majority of the international small cap managers underperforming the benchmark. The outcome was slightly more favorable when viewed over three- and five-year horizons, as over 50% of managers outperformed the benchmark.

Check out the more in-depth SPIVA Scorecard report below.




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