International Exposure: Active vs Passive

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
PhinanceMD
Posts: 441
Joined: Fri Apr 12, 2019 3:33 pm
Location: PNW

International Exposure: Active vs Passive

Post by PhinanceMD »

I know this is heresy in the BH community, but I’ll ask anyway: is there any valid argument for picking an active international exposure (net fees) for historical overperformance over the past 10 years over a passive fund? Specifically:

T Rowe Price Overseas Fund (TROSX)
Vs
Vang Total International Market Fund (VTIAX)


TROSX VTIAX
Security Type Mutual fund Mutual fund
Segment International Equity: Foreign Large Blend International Equity: Foreign Large Blend
Family T. Rowe Price Vanguard
Net Assets $5.62B $70.07B
Expense Ratio 0.77% 0.11%
Management Style active passive (index-based)
Dividend Yield 2.16% 3.37%
Minimum Investment $2,500.00 $10,000.00
YTD Return -14.85% -15.01%
1-Year Return -12.94% -12.64%
3-Year Return 6.07% 5.03%
5-Year Return 3.98% 3.82%
10-Year Return 6.16% 5.47%
60/30/10
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: International Exposure: Active vs Passive

Post by burritoLover »

10 years is meaningless noise.
User avatar
retired@50
Posts: 12829
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: International Exposure: Active vs Passive

Post by retired@50 »

Phinance wrote: Tue May 17, 2022 8:33 am I know this is heresy in the BH community, but I’ll ask anyway: is there any valid argument for picking an active international exposure (net fees) for historical overperformance over the past 10 years over a passive fund?
TROSX = T. Rowe Price Overseas Stock .77%
VTMGX = Vanguard Developed Markets Index .07%
VWIGX = Vanguard International Growth Fund .43%

Naturally, if one looks hard enough, a high(er) performing international fund can be found.

The fund you've mentioned, TROSX, doesn't appear to be much different than the Vanguard Developed Markets Index Fund (VTMGX) except the Vanguard fund has a much lower expense ratio, which will probably prove to be the winning feature in the long run.

** IF ** I was going to swing for the fences with a small portion of my international allocation, I'd consider using VWIGX, although, you'll see in the chart linked below, it may have just been luck that led to the out-performance of Vanguard International Growth Fund. But... something happened around 2017 that led the International Growth fund to begin to separate from the pack. No telling if that will ever continue.

PV Link: https://www.portfoliovisualizer.com/bac ... ion3_3=100

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
BitTooAggressive
Posts: 1085
Joined: Tue Jul 13, 2021 3:15 pm

Re: International Exposure: Active vs Passive

Post by BitTooAggressive »

Phinance wrote: Tue May 17, 2022 8:33 am I know this is heresy in the BH community, but I’ll ask anyway: is there any valid argument for picking an active international exposure (net fees) for historical overperformance over the past 10 years over a passive fund? Specifically:

T Rowe Price Overseas Fund (TROSX)
Vs
Vang Total International Market Fund (VTIAX)


TROSX VTIAX
Security Type Mutual fund Mutual fund
Segment International Equity: Foreign Large Blend International Equity: Foreign Large Blend
Family T. Rowe Price Vanguard
Net Assets $5.62B $70.07B
Expense Ratio 0.77% 0.11%
Management Style active passive (index-based)
Dividend Yield 2.16% 3.37%
Minimum Investment $2,500.00 $10,000.00
YTD Return -14.85% -15.01%
1-Year Return -12.94% -12.64%
3-Year Return 6.07% 5.03%
5-Year Return 3.98% 3.82%
10-Year Return 6.16% 5.47%
No
hnd
Posts: 1077
Joined: Mon Jun 22, 2020 11:43 am

Re: International Exposure: Active vs Passive

Post by hnd »

I think active international funds have generally a better shot at beating their indexes over say large cap US but it still feels like a fools errand. I've been investing in Oakmark's international investor alongside VXUS as it was the only decent international fund in my 401k choice initially. VXUS has been superior with less volatility. I also had some vanguard funds gifted to me some time ago. VWIGX is one of the funds. I've not liquidated any of this due to the person still being alive and wanting to talk about how that gift is doing. its done well but mostly because its basically a international fund + some iteration of FAANG.
User avatar
Topic Author
PhinanceMD
Posts: 441
Joined: Fri Apr 12, 2019 3:33 pm
Location: PNW

Re: International Exposure: Active vs Passive

Post by PhinanceMD »

Your points are well taken, thank you.
60/30/10
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: International Exposure: Active vs Passive

Post by ruralavalon »

Phinance wrote: Tue May 17, 2022 8:33 am I know this is heresy in the BH community, but I’ll ask anyway: is there any valid argument for picking an active international exposure (net fees) for historical overperformance over the past 10 years over a passive fund? Specifically:

T Rowe Price Overseas Fund (TROSX)
Vs
Vang Total International Market Fund (VTIAX)


TROSX VTIAX
Security Type Mutual fund Mutual fund
Segment International Equity: Foreign Large Blend International Equity: Foreign Large Blend
Family T. Rowe Price Vanguard
Net Assets $5.62B $70.07B
Expense Ratio 0.77% 0.11%
Management Style active passive (index-based)
Dividend Yield 2.16% 3.37%
Minimum Investment $2,500.00 $10,000.00
YTD Return -14.85% -15.01%
1-Year Return -12.94% -12.64%
3-Year Return 6.07% 5.03%
5-Year Return 3.98% 3.82%
10-Year Return 6.16% 5.47%
Over a longer period of time (15+ years) the difference in performance is not at all striking, and seems insignificant in my opinion.
Portfolio Visualizer, 2007-2022.

T. Rowe Price Overseas Stock (TROSX) is much less diversified (almost nothing in emerging markets) and does have a higher expense ratio (0.77%).

I think it's wise to prefer a good index fund over a good actively managed fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
bsteiner
Posts: 9210
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: International Exposure: Active vs Passive

Post by bsteiner »

Tweedy Browne International Value Fund TBGVX has done well despite its 1.38% expenses. It's earned 6.51% a year over the last 10 years, compared to Vanguard International Value VTRIX (5.78% a year after expenses of 0.36%) and Vanguard Total International Stock VTIAX (5.80% a year after expenses of 0.11%).
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: International Exposure: Active vs Passive

Post by ruralavalon »

bsteiner wrote: Tue May 17, 2022 11:32 am Tweedy Browne International Value Fund TBGVX has done well despite its 1.38% expenses. It's earned 6.51% a year over the last 10 years, compared to Vanguard International Value VTRIX (5.78% a year after expenses of 0.36%) and Vanguard Total International Stock VTIAX (5.80% a year after expenses of 0.11%).
Using the rear view mirror it's easy to find actively managed funds that have done better. Other examples are American Funds EuroPacific Growth R6 (RERGX) ER 0.46% and Dodge & Cox International Stock (DODFX) ER 0.62%. Portfolio Visualizer, 2010-2022. Both are diversified covering both developed and emerging markets, with more modest expense ratios.

But there is still no telling who will do best in the future. In 2021 93% of actively managed international equity funds underperformed their benchmark. SPIVA: 2021 Year-End Active vs. Passive Scorecard, link.

In my opinion its wise to prefer a good index fund over a good actively managed fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
Topic Author
PhinanceMD
Posts: 441
Joined: Fri Apr 12, 2019 3:33 pm
Location: PNW

Re: International Exposure: Active vs Passive

Post by PhinanceMD »

Nice, love the link, thank you for sharing.
60/30/10
Post Reply