Overseas Still Appeals

The grass looked greener around the world again in 2006, as investors stayed enamored of foreign markets. Strategic Insight reported that international equity funds posted a record $172 billion in net inflows (including $27 billion within ETFs) in 2006 in the U.S., about 20% more than the record high levels achieved in 2005.

The same trend was observed in Europe. According to Strategic Insight, investors in Germany, Italy, Spain, France, Switzerland, and the U.K. generally shied away from home-country investing in 2006, limited their net purchases of European stock funds, and net purchased significant amounts away from Europe. Moreover, investors in these countries net invested more in North American funds than in all European funds and made significant investments in Asia and emerging markets as well. Avi Nachmany, Strategic Insight’s director of research, expects the interest in foreign investments to continue due to those markets’ better trailing returns, currency trends, and a desire for prudent diversification. “Even now, [with] only 23% of all equity fund assets in international/global funds–and 77% in U.S.-centered funds — [it's] still too low.”