The growing global middle-income class is also becoming increasingly connected through the Internet in our information age. The number of Internet users doubled since 2010 to 3.5 billion and is growing at a 10% rate per year. The increased Internet usage comes shifting habits, such as global online purchases growing at 17% per year. Online retail may be a potential growth opportunity as it is still in its nascent stages, accounting for 7% of total retail sales worldwide.
The expansion of world trade and rising middle-income class have all contributed to a rapidly expanding global economy. However, the world’s transportation infrastructure has not kept pace with rising demand, which may also open an opportunity to further develop the world’s infrastructure and raise infrastructure investments.
The boom in global education will also improve human capital by raising more highly educated working class. For example, college admissions in Asia have become hyper-competitive, with over 200 million K-12 students all competing for admissions to top universities in China alone.
As investors consider the potential benefits of international exposure, some may also look into actively managed strategies. Goei argued that international stock fund managers are better positioned to add value. Over the years, active managers have exhibited a better track record in the international category. For example, 71% of large-cap international stock fund managers outperformed the MSCI ACWI ex US Index over the past year. Around 84% of large-cap stock fund managers outperformed the MSCI ACWI ex US Index over the past decade.
ETF investors interested in an active strategy to tap into international markets can consider something like the Davis Select Worldwide ETF (NasdaqGM: DWLD), which is managed by Goei. DWLD focuses on long-term global opportunities that incorporate Davis Advisors’ judgement experience, high conviction, low turnover, accountability and alignment.
The ETF also incorporates the same principles found in Davis’ winning international mutual fund strategies. The Davis International Fund has shown an average annualized 9.9% return over the past five years, compared to the MSCI ACWI ex US Index’s 6.8% return. The Davis Global Fund has exhibited a 15.8% average annualized return over the past five years, compared to the MSCI ACWI’s 10.8% return.
Financial advisors who are interested in learning more about international markets can watch the webcast here on demand.