My Pick: Columbia Acorn International Select Fund/Z ACFFX
Looking at International funds that invest in small or mid sized companies through Etrade's fund screener is not easy. They allow you to pick "Equity International Small Company " and "Equity Global Small Company" with the second category presumably also investing in US companies. I found however, that screening out al the global funds and then checking the category at Morningstar uncovered a few additional choices that were focused no smaller companies.
Columbia Acorn International Select Fund/Z ACFFX
Columbia Acorn International Fund/Z ACINX
Neuberger Berman International/Trust NBITX
All three have turnover ratios below 50% which is much lower than the 91.68% average listed for Small Company Foreign funds and the expenses are all less than the 1.67% average of the group.
NBITX has done well (I actually own it) but has lagged recently and has the highest turnover of the bunch. ACINX has the lowest expenses and has done almost as well as ACFFX- it has likely beaten ACFFX when you take the expenses into account. But I am picking ACFFX for our hypothetical portfolio.
Why? you might ask...
ACINX has $3,713.67 million under management
ACFFX has $121.01 million under management
As of 10/13/06 ACINX had 1.45 % of its assets in its largest holding: Hexagon, a Swedish Industrial Materials company (according to Morningstar). 12.09% of its assets are in its top ten holdings.
As of 10/13/06 ACFFX had 5.73 % of its assets in its largest holding C&C Grp, an Irish Consumer goods company (Morningstar). 36.41% of its assets are in its top ten holdings.
Funds that invest in small companies have to be concerned about what their purchase or sale of stock in a company will do to the price of that company's stock since smaller companies do not have as many shares outstanding and do not trade at the same high volumes as large companies. If a fund manager attempts to buy or sell a $200 million stake in a company that only has $2 billion worth of stock outstanding- that action may have an impact on the price she will be able to get for her transaction.
So my belief is that ACFFX will be able to make adjustments easier and focus on a smaller number of companies which will hopefully be more efficient in the long run.