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If you thought of ducking the recent market volatility on the banks of the Thames or in the shadow of the Pyrenees, get another map. International investments didn't protect investors in the recent rout, even though the prevailing wisdom is that those markets aren't aligned with the U.S.

Since the March 10 peak of the

Nasdaq Composite

index, the average international fund has had a return of negative 10.5%, while U.S. stock funds were down an average of 8%, according to

Lipper

. In the year to date, returns of international funds (-6.8%) lag those of domestic funds (0.7%), according to

Morningstar

.

That's driven some financial advisers, like Mike Howard of Burlingame, Calif., to cut back on his clients' international exposure to 10% from 20%. He's debated cutting it out altogether, and already he's eliminated emerging markets. "You never get the kind of returns from international markets that last long enough to either enhance returns or reduce risk," he says.

Lou Stanasolovich, a planner with

Legend Financial

in Pittsburgh, agrees with Howard about the uncertain returns, though he maintains a 30% weighting abroad.

"I'm not of the camp that you need an overwhelming need for international funds," Stanasolovich says, adding that much of his clients' allocation to international stocks comes from laggard sectors such as value and real estate.

These financial advisers' lack of enthusiasm for foreign stocks comes from a perception that international markets behave a lot more like the U.S. these days. The main reason is globalization.

"Is

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a Finnish company if it sells most of its cell phones abroad?" asks Mark Hurley, president and chief executive officer of

Undiscovered Managers' Funds

of Dallas. "We've had the true emergence of multinationals."

Over the last couple of decades, the markets look alike on absolute terms, too. The

Morgan Stanley Europe Asia Far East

index, known as the EAFE, and the

S&P 500

have a correlation of 0.50 (a figure of 1 would mean that those markets are perfectly correlated). But throughout the 1980s, those two indices had a correlation of just 0.46.

For large-cap stocks, the correlation is much higher. A separate report from Undiscovered Managers shows that from February 1993 through December 1995, the EAFE and S&P 500 had a monthly correlation of 0.40. In the following three-year period -- January 1996 to December 1999 -- that had shot up to 0.71.

None of this sways international managers like Nigel Emmett of

J.P. Morgan Investments

, who doesn't see the creeping correlation as significant reason to trim overseas investments. Though the numbers suggest that different areas of the world act more in sync with one another than before, Emmett maintains that international investing provides diversification that investors who load up on highflying American stocks won't get.

"We wouldn't be having this discussion if we were in a prolonged period of U.S. underperformance," Emmett says.

(

TSC

International Editor

Andrew Morse

also argued in a recent

column that international funds are an essential portfolio component.)

That may be so, but international funds didn't provide the comfort investors may have been looking for in recent weeks. In the most recent slide, days of heavy selling at home were followed by losses abroad.

"The notion of our market correcting without taking the rest of the world with it is kind of moot," Hurley says.

But that's not the point, says Scott Wells, an adviser with financial-planning firm

Evensky Brown & Katz

of Coral Gables, Fla. "With developed markets, over time they're going to move about the same

with the U.S., but they will move at different times."

After a decline, Wells says those markets climb back at a different pace. Take, as an example, value investing. Though it's been in a bear market in the U.S. for almost three years, on an international scale, the style of picking cheap stocks right before their prices take off has shown signs of life for the last few quarters, as evidenced by the

(DFIVX) - Get DFA International Value I Report

DFA International Value fund, which was up 2.1% over the last 12 months. It has since given up some of its performance and is in the red in the year to date, even while U.S. value funds are up modestly.

Investors seem to be tuning out the arguments on both sides and are simply following the returns. After a red-hot 1999 in which some Japan funds posted triple-digit gains, $28.8 billion in new cash came into international funds in January and February, according to

Financial Research

of Boston. But in the last two weeks through Monday,

TrimTabs.com

estimates that about $1.9 billion left international offerings.