U.S. Global Investors’ East European Fund (EUROX) is among the industry leaders when it comes to five-year annualized returns, according to Lipper, which notes that the fund returned nearly 42 percent for the period ending November 21, 2007.
And Julian Mayo, who helps lead this fund and U.S. Global’s Global Emerging Markets Fund (GEMFX) at Charlemagne Capital in London, says — despite strong appreciation — emerging markets still offer investors “relatively good value.” They trade at a small discount relative to their U.S. peers and have “super earnings-per-share growth,” says Mayo.
“Fundamentally today, these investments offer structural quality and growth,” the portfolio manager explains. “Asia companies in the 1980s were generally poor in terms of value creation. But now, these companies have strong balance sheets and debt-to-equity ratios.”
And emerging markets overall are fiscally sound. “Profit focus and profit growth are a focus for companies,” Mayo shares, as foreign ownership and other conditions have prompted a sea change in management, efficiency and performance.
He suggests that investors consider using developed-country holdings as one side of a “binary barbell,” with holdings in emerging markets occupying the other side.
In the third quarter of 2007, U.S. Global Investors grew its assets under management by some $300 million to about $5.35 billion; the company’s board approved a doubling of its monthly dividend beginning in October.
“The wind continues to hit our sails when it comes to growth in emerging markets and natural resources, and we remain confident in those sectors,” says Frank Holmes, CEO and chief investment officer. “What we’re seeing today in emerging nations makes it a classic example of great bull markets climbing a wall of worry and doubt. Despite years of strong GDP growth in China, India and elsewhere, much of Wall Street and the financial media remain unconvinced that this global shift is for real.”
For the one-year period ending September 30, 2007, U.S. Global’s China Region Opportunity Fund ranked 19th overall in total return out of some 17,000 funds, and the firm’s Global Emerging Markets Fund placed 76th, according to data published in The Wall Street Journal and tracked by Morningstar.
U.S. Global’s Global Resources Fund (PSPFX) ranked ninth overall in total return for the five years ending September 30 out of more than 11,000 funds, and the company’s Eastern European Fund (EUROX) was 12th. The Eastern European Fund placed fifth overall in total return over the 10-year period ending September 30, out of some 5,000-plus funds tracked by Morningstar.
Assets under management for U.S. Global Investors’ SEC-registered funds and other clients stood at about $5.38 billion at the end of the quarter, more than 7 percent higher than the $5.00 billion on June 30, 2007, and up about 19 percent from the $4.52 billion as of September 30, 2006. Assets under management for the latest quarter averaged $5.04 billion, up from an average of $4.80 billion during the first fiscal quarter of 2007.
As of September 30, 2007, seven of the nine equity funds managed by U.S. Global Investors were among the top performers in the overall mutual-fund universe in time periods ranging from three months to 10 years, according to rankings published in The Wall Street Journal. The Eastern European Fund placed fifth overall in total return over the 10-year period ending September 30, 2007.
“A century of data shows the presidential election cycle to be one of the most reliable market barometers,” says Holmes. “The economic conditions we see today, both at home and abroad, give us confidence that this year and 2008 will follow the long-term trend.”
Janet Levaux is the managing editor of Research; reach her at email@example.com.