The Daily Screen: The Best Global Funds

No matter where you've invested this year, it has paid to think small -- small-cap, that is.

That's been the story in the global or world fund category, the focus of today's Daily Screen. These funds invest in both U.S. and foreign stocks, and it's been a tough year all around. The S&P 500 and every single foreign stock fund category is under water, according to Morningstar. So, it's no surprise that the average global fund is down more than 8% since Jan. 1.

Over the last year global funds have used their foreign exposure to their advantage, beating the S&P 500, but over the longer term the money they've sent overseas has held them back. Global funds trail the S&P 500 by a wide margin over the last five- and 10-year periods.

Global Cooling Global funds haven't matched the broader market for much of the past few years
	Avg. Global Fund	S&P 500
YTD	-8.2%	-4.1%
1-Year	15.5	9.6
5-Year	11.0	20.9
10-Year	12.5	18.9
Source: Morningstar. Annualized performance figures through Oct. 20.

But some have ridden a sizable stake in small-caps to outsize returns over the last year. When we screened the category for global funds that beat their average peer over the last one- and three-year periods, we found a bunch of funds with sizable small-cap stakes -- small- and mid-caps have generally outperformed big-caps at home and abroad. Here's a list of the top 10 global funds ranked by their one-year return.

Top of the World, Ma These global funds have topped their peers and the S&P 500 during the past year
Global fund	1-Year Return	3-Year Return
(MAGCX)Merrill Lynch Global Small Cap	85.1%	27.3%
(WVCCX)Warburg Pincus Global Post Venture	72.0	41.5
(DGSCX)Dresdner RCM Global Small Cap	58.4	31.3
(SGSCX)Kemper Global Discovery	41.6	22.4
(AGRAX)Atlas Global Growth	39.9	21.2
(SEQAX)Security Global	39.8	20.4
(OPPAX)Oppenheimer Global	39.2	20.8
(GIFAX)AIM Global Infrastructure	36.5	11.3
(AGACX)AIM Global Aggressive Growth	36.4	14.3
(PAGAX)Phoenix-Aberdeen Global Small Cap	34.8	11.9
Avg. Global fund	15.5	11.0
S&P 500	8.8	15.0
Source: Morningstar. Annualized performance figures through Oct. 20.

This pack of funds put about 40 cents of every dollar in U.S. stocks -- about the same as their average peer. Where they stand out is their taste for small- and mid-caps. The average global fund primarily invests in big-caps, while these 10 funds, on average, had 71% of their money in small- and mid-cap stocks.

There were, however, funds on the list that focus primarily on big-caps, including the two broker-sold funds from AIM Funds -- AIM Global Infrastructure and AIM Global Aggressive Growth -- in addition to broker-sold Oppenheimer Global and no-load Atlas Global Growth.

As usual, we've combined the 10 leading funds' portfolios and sorted them for a collective top 10. Most of the names here involve tech or telcos, led by software shop Cadence Design Systems (CDN), chipmaker National Semiconductor and wireless giant Vodafone (VOD). But given these funds' broad palette, there isn't overwhelming consensus, where all would own a stock like Cisco Systems(CSCO).

The networking titan's shares are owned by the same number of these funds that hold shares of automaker Porsche.

Under the Hood The stocks with the biggest weighting in the combined portfolios of the above 10 funds.
Stock	Weighting in Top Funds	Number of Top-10 Funds Owning the Stock
Cadence Design Systems(CDN)	1.0%	4
National Semiconductor(NSM)	1.0	3
Vodafone Airtouch(VOD)	0.8	2
Cisco Systems(CSCO)	0.7	3
NTT Docomo	0.7	5
Toshiba	0.7	3
Sun Microsystems(SUNW)	0.6	4
Reckitt & Bensicker	0.6	3
Enron	0.6	1
Porsche	0.5	3
Source: Morningstar. Holdings as of funds' most recent portfolio reports.

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