No stranger to foreign investing, Dr. Ken Waltzer, president of Kenfield Capital Strategies, has been using global strategies to diversify his clients’ portfolios ever since working with investment guru Ken Fisher years back.
“Before I was in the business I used him as an investment manager for one of our accounts, and he was a big proponent for investing internationally,” Waltzer said. “When I construct a portfolio it’s a global one, and I use a global index as a benchmark against which I compare and choose my allocations. I’m more overseas than in the U.S. because the U.S. is less than half the global market.”
Clients are happy to be more diversified, Waltzer said. “I make the point that it’s for diversification. The only time they question things at all is when the S&P outperforms the overseas market, which it has since about 2008. [But] I explain that the U.S. doesn’t always outperform, like from 2003 to 2007, so you never know when it’s going to happen.” And that period is all too fresh in most investors’ minds to be forgotten so soon.
Regardless of client questions, the U.S. doesn’t occupy the same size spot in client portfolios that it does in the global index; Waltzer underweights the U.S. While home sweet home may be currently around 47% of the index, in Waltzer’s client portfolios, it sits at 44.5%, with overweighting in other countries making up for it
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“In general, I use the market index as my benchmark and my comparison, so if I didn’t have any tilts at any particular time I’d mimic it. That being said, I do modify it pretty much all the time, based on my outlook for the next few years. Since 2009, I’ve been emphasizing more economically sensitive [countries],” he said.
So how does Waltzer choose countries? “I look at relative valuations and buy more cheap [countries ]and less expensive. I’ve been loading up on emerging markets the last few months; they’d gotten very cheap, and Japan too, and they finally decided to go up. [It's] based on what looks cheap or expensive, and whether I see economic growth or an indication of it,” he said.
Japan is overweight currently “and [we're] significantly overweight in emerging markets in general,” Waltzer said. That breaks down into “significantly more in Latin America, and eastern and emerging Europe, such as Russia and Hungary.” He’s mostly underweight in Western Europe, with the exceptions of Germany, Italy and Spain.