Investors Hone Country Fund Approach

Joyce says there could be a longer path to recovery in Europe. "We're less bullish on Europe," he says. "When I was on a business trip to London in May, a lot of the hedge fund managers over there were waiting for the other shoe to drop. Right now the markets in Europe are being affected by their credit crisis a lot more than people initially thought they would be."

Compelling Valuations

Some of the world's emerging markets that had seen unprecedented growth in recent years have been the quickest to fall in 2008. These steep declines have one money manager seeing value. "Valuations have changed for emerging markets over the past several weeks and our forecasted real returns are now more compelling across the board than they were earlier in the year," says David Hogan, client portfolio manager of the Laudus Mondrian Emerging Markets Fund (LEMIX Quote).

Despite the more favorable valuations, Hogan believes some foreign markets are better positioned than others. "The portfolio has overweight exposure to select markets such as Taiwan and Turkey where the outlook is more positive from both top-down and bottom-up perspectives," he says. "Relative to the MSCI World Index, we are underweight the U.S. in favor of the Pacific region including Australia, Japan and Singapore. We are also overweight certain European markets."

As of June 30, top holdings of LEMIX included Lukoil, Tenaris (TS Quote), Taiwan Semiconductor Manufacturing (TSM Quote) and Gazprom.

The Rising Sun

Chad Deakins, portfolio manager of the RidgeWorth International Equity Fund (STITX Quote), says the U.S. has an outlook that is relatively favorable. "The U.S. is much further along in the correction phase compared to other markets," he says. "Europe looks particularly weak compared to the U.S. right now, although not as weak as the emerging markets."

Deakins also likes the Japanese markets. "Japan looks stable right now," he said. "The stocks there are very, very cheap."

East Japan Railway was a top-five holding of Deakins as of Aug. 31. It is also a component of EWJ. "It's trading at an attractive discount right now," Deakins said. "It has stable cash flows and will continue to make profits in this environment."