Benjamin Segal's strategy of avoiding large companies may help his Neuberger Berman International Fund post the best performance this year...
Benjamin Segal’s strategy of avoiding large companies may help his Neuberger Berman International Fund post the best performance this year among funds that invest outside the U.S.
About 60 percent of the mutual fund’s holdings aren’t part of the Morgan Stanley Capital International Europe, Australasia, Far East Index, a benchmark for managers of U.S. funds that invest in companies based outside the country.
The $560 million fund had 21 percent of its assets in energy shares at the end of June, more than double the industry’s weighting in the Morgan Stanley index. Talisman Energy, a Canadian oil and natural-gas producer once part of Europe’s BP and not included in the index, is the fund’s No. 3 holding.
“We are thinking creatively,” Segal said. “We own stocks that a lot of people don’t own, and we are not afraid of not owning big companies” such as BP.
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The fund has risen 12.7 percent this year, as of Aug. 9, ranking third of 128 U.S. funds that invest internationally, according to data as of Aug. 9 tracked by Bloomberg.
The Westcore International Frontier Fund is the leader with a 13.3 percent gain.
The No. 2 fund is Rochdale Atlas Portfolio, which has risen 12.9 percent.
During the past three years, the Neuberger fund has returned 25.6 percent a year on average, more than all other funds in its category.
International stocks have outperformed U.S. shares as a slide in the dollar boosts the value of profits in other currencies.
The Morgan Stanley index has returned 11 percent a year since the start of 2002, outpacing the 3 percent gain in the Standard & Poor’s 500 Index.
Segal said the rally in international stocks has prompted him to stray even further from the big names in the index to focus on finding smaller, lesser-known companies.
“It’s not a tame fund,” said Bill Rocco, an analyst at Morningstar, a Chicago-based mutual-fund research firm. “It goes its own way.”
Since he took control, the fund’s assets have grown almost sixfold from $95 million. Investors are depositing about $100 million each quarter.
Segal said his team, including four analysts, can accommodate as much as $5 billion.
Segal is optimistic that demand from China and the U.S. will bolster oil prices, helping sustain earnings for companies such as Talisman and BP.
Talisman is a better bet on oil than BP because all of its revenue comes from selling the commodity, Segal said. The Calgary-based company in the past two years has relied on drilling off the coast of Malaysia and in upstate New York to boost output and reserves.
Chief Executive Jim Buckee pledged to increase per-share output by 5 percent to 10 percent until at least 2007.