SAF.L Share News (SAF)

By Trevor Hunnicutt NEW YORK, March 23 (Reuters) - Volatility in U.S. equitymarkets this year is pushing investors not only to invest instocks abroad, but also to commit their money to an even moreforeign place: the hands of stockpickers rather than indexfunds. A near decade of gains in U.S. stock prices has leftinvestors on edge about the prospect that anything could end theparty, including the prospect of interest rate rises under newFederal Reserve Chairman Jerome Powell or a misstep by one ofthe market's darlings. For instance, the 9.2 percent two-day slide of Facebook Inc earlier this week, which wiped out $50 billion in itsmarket capitalization, underscored the risks to market leadersin the technology sector after the social media company facedquestions from regulators and politicians about how its users'personal data was mined by a political consultancy hired byDonald Trump's presidential campaign. Josh Shores, principal at Southeastern Asset Management Inc,said the time is ripe to look outside the United States asvaluations are more attractive overseas relative to their risks. "At the end of an almost 10-year bull up-cycle where theU.S, and growth and passive have really dominated," he said, "wefeel good about being positioned the other way from here." Small wonder. Stockpickers focused on investment abroad have been hugebeneficiaries of new investor cash as many have beaten theirbenchmarks. Those funds are on course to post their secondstraight year of inflows even as their U.S. counterparts facethe sting of investor flight to lower-cost index funds. Actively managed non-U.S. stock funds have already attracted$19.4 billion in 2018, far surpassing outflows at the same timelast year, and nearing the $23.5 billion total for all of 2017,according to Thomson Reuters' Lipper research unit. Their passively managed rivals have taken in $45.6 billionso far this year, through February. In 2017, 50.8 percent of "foreign large blend" funds trackedby Morningstar Inc beat their index-tracking rivals, while 59.1percent of diversified emerging market funds succeeded, in bothcases improving their less impressive long-term track record. The volatile start to 2018 for U.S. stock prices is givinginvestors all the more reason to defang portfolios heavilyweighted towards technology giants. Facebook accounts for about2.0 percent of an S&P 500 index fund's return. "Tech is not a heavy benchmark constituent in our part ofthe world," said Thomas Melendez, manager of the $11 billion MFSInternational Diversification Fund , whose performancehas bested most rivals over the last decade, according toLipper. 'IT'S MORE THAN FACEBOOK' More cash to manage would be a boon to investors includingFabio Paolini, a portfolio manager on the AMG Managers PictetInternational Fund , which has turned in strongerperformance than its peers and index over the past three years.Pictet Asset Management SA manages $197 billion. Paolini and other investors focused outside the UnitedStates see places where they can put the cash to work withbargain-priced, all-weather companies that will grow even if theeconomy stalls. "We see opportunities - a little bit everywhere," saidPaolini. The company took a stake, for instance, in Safran SA , the Parisian aircraft engine company that he saidenjoys a near-monopoly position in its market. Southeastern, with $18 billion under management, has builtup a stake in London-based Hikma Pharmaceuticals PLC inrecent months, as other asset managers have ditched stocks inthe region. That stock's true value has been clouded by investors'pessimistic view on both generic drugs and the United Kingdom'snegotiations to exit the European Union, but the drug companyhas valuable business units including injectable drugs, saidShores. More than four in ten fund managers surveyed by Bank ofAmerica Corp are holding less stock in Britain than theirbenchmark, an all-time high. Many of the active international funds are taking big betson small groups of stocks, hoping that they will end up with farbetter gains than index funds whose performance is diluted byhundreds of holdings. The Prudential Jennison Global Opportunities Fundhas fewer than 40 holdings, with top positions like TencentHoldings Ltd taking up nearly 6.0 percent of theportfolio. One of the portfolio managers, Thomas Davis, said he hashigh conviction in the Chinese technology giant's prospects. Thecompany on Wednesday reported quarterly revenue that fell shortof estimates but its profits were up 98 percent compared to theyear prior. "You have Facebook, Opentable, Uber, Airbnb, some basicfinancial services all embedded within the Tencent WeChat app,"said Davis, noting that the company offers many functions in oneplace. "It's more than Facebook." (Reporting by Trevor Hunnicutt; editing by Jennifer Ablan andClive McKeef)