Borderless Investor

Borderless investing - not just the concept, but the term itself - made a rare appearance in Sunday’s New York Times. Citing data on global funds, the piece notes a growing interest in borderless investing among institutions.

The notion of borderless investing appears to be taking hold among institutional investors. Through the first half of this year, institutional funds placed $18.7 billion into globally oriented strategies that permit managers to invest anywhere in the world, according to Eager, Davis & Holmes, a consultant to institutional managers that is based in Louisville, Ky. That is a huge jump from the $1.4 billion that was invested in this strategy in all of 2006. “The question is: Is this an anomaly, or is it something that will continue to develop going forward?” said David F. Holmes, a partner at the consultancy.

Boston-based MFS, which pioneered mutual fund investing in the 1920s, is a borderless believer.

David A. Antonelli, chief investment officer for non-United States equity investments at MFS Investment Management, whose MFS Global Equity fund also invests in this borderless style.

“When you’re buying a TV, you might look for a model with the best picture quality, or you might look to what Consumer Reports said was is the most reliable television,” he said. “That TV might end up being a Japanese TV, but you’re not buying it because the company that made it was headquartered in Japan.”

He added that “over time, this will be the same way people invest.”

The annual Forbes International Investing Guide has an interesting profile of Rob Gensler, who manages the T. Rowe Price Global Stock Fund. Gensler doesn’t use the term “borderless” but he does note that the line between “domestic” and “international” investing is increasingly blurry.

A good number of global funds have a manager to handle the U.S. portion of the portfolio and another to pick the international stocks. “But you can’t break the world up into pieces,” Gensler says, pointing out that 30% of the profits reported by S&P 500 companies now come from outside the U.S., up from an estimated 14.5% five years ago.

Still, the old “domestic vs. foreign” mindset remains all too common among many fund managers:

Gensler is dismayed that Americans who manage foreign funds often know too little about the scene overseas. “Half their managers and analysts don’t even have passports, while I’ve been going to China since 1983,” he boasts. “I do a quarter-million air-miles a year.”

The New York Times has an interesting piece on outsourcing in its ‘World Business’ section. There’s not much news here for those who have been following either India or general outsourcing trends, but a few important nuggets that drive home where all this is headed:

–IBM’s US workforce fell by 31,000 since 1992 while its Indian headcount rose to 52,000

–India is Citigroup’s fastest-growing international market

–Infosys spends $65 per $1000 of revenue on training. IBM spends less than 7 bucks

–Eli Lilly discovered a new molecule, but hired an Indian firm to shepherd it through the remainder of the development process

–Cisco now has something called a “Chief Globalization Officer”

–Investment banks like Morgan Stanley and Thomas Weisel are hiring Indian analysts to cover American stocks

But far and away the most trenchant observation in the story belongs to Princeton economist Alan Blinder:

The West, he [Blinder] argued, would shed jobs in easily outsourced fields, like accounting, an increase work among jobs like police officers and doctors, which must be done in person.

Fewer analysts and accountants - and more doctors and cops? Amen.

On a lighter note…I will be speaking at the Las Vegas Money Show on Borderless Investing, Emerging Markets and other international investing topics in May. If you’re in the area, I hope you can stop by. The Money Show folks always do a great job assembling a roster of interesting speakers and exhibitors. And admission is free.

Here’s my latest Borderless Investor column at Forbes.com. Emerging markets may be in for some choppy trading with the Iran standoff heating up. While that’s hardly an encouraging development, it’s not going to be the end of the world. Nor will it ruin the long-term fundamental picture for emerging market stocks. Don’t lose sight of the big picture.

Here’s a column I wrote for Forbes.com on why global banks are still worth a look.

When markets blow up - and rise again from the ashes as they are doing now - it can often seem like international investing is a pointless exercise. Why bother diversifying if the world is increasingly correlated and moving in the same direction anyhow?

Well, there are plenty of great reasons to bother. Mainly it’s in the form of the greater opportunity set that arises when you look overseas. But it’s also important to remember that correlation is only one of the variables in the portfolio risk formula. You can still benefit from diversification even if correlations are rising.

This paper is a little old, but the lesson for today’s markets is fresh. Meir Statman and Jonathan Scheid do a great job explaining why global diversification still matters.

A few good comments have come in on my previous post on Toyota. Perhaps I should clarify what I meant.

Toyota’s a fantastic company. If they want to create a sports car, I’m sure they can do it and I’m sure it will be a huge commercial success. If they want to make a spaceship that goes to Jupiter, I’ll bet they could make one of those too.

I guess it was the comparison to Ferrari and Porsche that set me off and prompted the “crack pipe” image. I’m a little old-fashioned about this, but in my book I just can’t fathom walking onto a car dealer’s lot and driving away in a Toyota sports car instead of a Ferrari (or Porsche). Forget about the specs, forget about the money. Where’s the passion? Where’s the soul?

Put it another way: Would Miami Vice have been remotely the same if Sonny Crockett drove a Toyota?

Bloomberg sez:

Toyota Motor Corp., the world’s largest automaker by value, gained 90 yen, or 1.5 percent, to 5,980. The company will introduce a sports car in 2009 to compete against high-end Ferraris and Porsches, the Nihon Keizai reported.

Don’t get me wrong…I love Toyota…but this is just crazy talk.

More evidence that the Japanese banking crisis is officially ancient history. Bloomberg reports that Japan’s best and brightest are now interested in working in finance:

The fastest economic growth in 15 years and record profits of $27 billion in fiscal 2005 helped financial companies overtake electronics makers as the biggest recruiters at Japan’s most selective universities, including the top two schools, University of Tokyo and Keio University.

“Japanese banks are now being very aggressive and have changed their posture to offense from defense,'’ said Akira Ukaji, a 21-year-old majoring in politics at Keio University in Tokyo. “I want to join Mitsubishi UFJ and take on overseas banks such as Goldman Sachs Group Inc.'’

Obviously this won’t pay off overnight, but it’s an encouraging development for a sector that’s desperately in need of fresh talent.