As the U.S. economy grew 3.2% last year, the economy of China grew 10.7%. India’s expanded 9.2%; Kazakhstan’s, 10.6%; Vietnam’s, 8.2%; and Mexico’s, 4.8%. Growth in many overseas markets is outpacing the U.S. economy, which is expected to slow rather than expand next year. “The outsized growth over the next 15 to 20 years is probably coming from outside the country,” says Jeff Saut, chief investment strategist for St. Petersburg-based Raymond James.

[Art: Cabry Cyrill]

Keith Dubauskas, vice president at Citi Private Bank in Palm Beach, echoes that belief. “Half the opportunity set is outside the U.S.,” he says.

Florida wealth managers interviewed by Florida Trend are recommending 20% or more of an average stock portfolio be invested internationally. For an individual investor, that typically means mutual funds, exchange traded funds (ETFs) or foreign stocks that trade in U.S. markets through American Depositary Receipts, or ADRs.

Many Florida investment managers go beyond the vehicles readily available in the U.S., however, and look for small companies in niche markets in developing countries. Boca Raton investment manager Robert Levitt spends much of his time traveling to investigate opportunities from the Ukraine to Brazil. “Our bet is that developing economies are going to grow faster than the OECD economies,” he says.

Interest is particularly high for companies that cater to the burgeoning middle class in developing nations. Also, there’s a need for roads, sewers, communications networks and other facilities. Jim Grinney, chief investment officer for Florida at Northern Trust, says, “I think that one thing you could use with almost any country is the whole infrastructure idea.”

Jeff Saut [Photo: Mark Wemple]

Jeff Saut
Chief investment strategist
Raymond James, St. Petersburg

Recommended international allocation: 20%
International strategy: Overlay a diverse international fund with exchange traded funds for specific countries.
Emerging markets he likes: > Thailand, Malaysia, Indonesia, Brazil, Peru, Kazakhstan and Mexico. One emerging market of particular interest is Vietnam because, like China, it has continued to build a middle class, says Saut. But it’s a difficult country to invest in because the purchase of Vietnamese securities must be settled in only one day (compared to three in the U.S.).
Markets he’s concerned about: » France and Italy — “I think there is a problem. It has nothing to do with politics.” They both have low birth rates. The two countries are importing workers but not assimilating them well. » China — “There’s going to be a banking accident,” says Saut. “I don’t know when it is going to happen.” » Russia — ”We’ve taken all of our money off the table in Russia. I don’t like what Putin is doing over there.” » Japan — “Japan is virtually shutting down,” he says, voicing concern about the labor force and Japan’s unwillingness to import workers.

Jim Grinney
Senior vice president, Florida
Northern Trust Bank, North Palm Beach

Assets under management: $30 billion (Florida)
Minimum investment: $1 million
Recommended international allocation: 19% to 22% (18% to 20% in developed countries and 1% to 2% in emerging markets)
Sectors he likes: » Infrastructure — In emerging countries like India, there’s a need for roads and other infrastructure. But even in developed countries, infrastructure needs to be replaced. Grinney likes General Electric and Dutch steel company Arcelor Mittal. » Consumer products — Companies that offer consumer products to countries such as China, where middle-class incomes are growing. McDonald’s and Pepsi are two examples.
Broad market exposure: Grinney uses Northern Trust’s proprietary international funds as well as the iShares MSCI Emerging Markets Index (EEM) and the IShares MSCI EAFE Index (EFA).

Andrew Mehalko
Chief investment officer
GenSpring Family (an affiliate of SunTrust), Palm Beach

Assets under management: $10.5 billion
Minimum investment: $10 million
Recommended international allocation: “A little over 20%”
Markets he likes: » Europe — Companies large and small are shedding non-core businesses and outsourcing labor to Eastern Europe, says Mehalko.
» Russia and the former Soviet countries — Mehalko says GenSpring has a small exposure there, but, “There are underlying industries or sectors that no one is paying attention to.” Instead of oil and energy, he is looking at companies that focus on Russia’s basic infrastructure needs — things like rebuilding power grids. He’s also looking at financial companies that could benefit from Russia’s mortgage industry, which is in its infancy, and the more established banking system in places like Kazakhstan. Mehalko says he prefers small, private companies in Russia. » Japan — Four years ago, GenSpring targeted 40 to 60 companies that were trading below their net cash value. “Since we’ve been invested there, we’ve doubled our money,” says Mehalko, adding that the overall Japanese market did nothing over the same period. Going forward, Mehalko likes Japan and Korea.
For the long term: > China — Too much capital is flowing into the market right now, says Mehalko, who adds that GenSpring has “a little bit of exposure” there. But, he says, “Long term, it’s a great opportunity.”
Markets he doesn’t like: » India— “They have a lot of problems,” says Mehalko, noting that there is so much bureaucracy that nothing gets done. Also, he says that although we hear about well-educated Indians, many of the people are uneducated. “The infrastructure in India is not good.”

Elizabeth Howarth [Photo: Mark Wemple]

Elizabeth Howarth
Vice president
Merrill Lynch, Tampa

Minimum investment: $500,000 in investible assets
Recommended international allocation: Varies with client’s situation and comfort level
Markets Merrill Lynch likes: » Brazil and central Europe — Key sectors in those areas include basic materials, telecom and utilities. » Europe —
Howarth likes oil and gas, personal household (consumer) products and healthcare.
Economic impacts: If the U.S. economy falls into recession, Taiwan, South Korea and Mexico would suffer while Russia, Brazil and central Europe would prosper, Howarth says. If there is a commodity shock, such as an oil field explosion or disruption from a hurricane, Russia, Brazil and central Europe would suffer because there would be demand for oil and resources, but those countries have less access to capital and might be unable to meet demand. In a credit, or liquidity, crisis, cash-poor countries such as Turkey, South Africa, Hungary and India would suffer while cash-rich countries including China, Malaysia and Taiwan would prosper.

Tom Schiedel

Keith Dubauskas

Tom Schiedel
Managing director for the Southeast region
Citi Private Bank, Palm Beach
Keith Dubauskas
Vice president
Citi Private Bank, Palm Beach

Minimum investment: Targets investors with at least $10 million in investible assets
Recommended international allocation: Starting point of 30% for equity portfolios, with adjustments depending on the client
Core global assets: Dubauskas says that the long-term part of an international portfolio takes a global view and can be composed of diversified mutual funds, separate equities from outside the U.S. (usually in the form of ADRs), ETFs and non-traditional investments such as hedge funds and private equity.
Investing signals: » Middle-class growth in emerging markets — Discretionary spending on food, clothing, electronics and other goods is increasingly important. » Infrastructure — Demand for infrastructure is a global theme.
Markets they like: » Europe and large-cap stocks in the U.S. — Because of valuation, Schiedel and Dubauskas favor the U.S. and Europe over Japan, the Pacific Rim and emerging markets.

Robert Levitt

Robert Levitt
Founder, chief investment officer
Levitt Capital Management , Boca Raton

Assets under management: $450 million
Minimum investment: $3 million
Recommended international allocation: 80%
International strategy: Focus on global themes and invest directly in foreign companies, not in the ADRs that trade in the U.S. because only a limited number of companies trade as ADRs.
Sectors he likes: Energy, base metals and agriculture — Levitt looks for countries and companies that fit into the sectors he believes will drive economic growth. That means iron ore in the Ukraine; cement in Egypt; sugar and other agriculture in Brazil; oil, agriculture and base metals in Canada; and natural gas in Qatar.
Markets he likes: » Asia — Levitt looks for economies in what he calls “the catch-up phase,” with populations looking to better their lives through better quality food and other basics.
Markets he’s concerned about: » South America — Political issues in Venezuela and some other parts of the region

Will Wheeler

Dave Moore

Will Wheeler
Chairman of the investment commitee,
Coral Gables Trust Co.Coral Gables Trust Co.
David Moore
Chief investment officer
Coral Gables Trust Co., Coral Gables

Minimum investment: $250,000
Recommended international allocation: 18% for stock portfolios
International strategy: For equities, two core international funds, one based on fundamental research and the second relying on quantitative technical models. For fixed income, a multisector global bond fund.
Markets they like: > Europe — For equities, David Moore says Europe has provided tremendous returns for the past five years and believes that will continue. Moore likes Europe-based multinationals, including French pharmaceutical company Sanofi-Aventis, French oil and gas company Total SA and Finnish mobile phone maker Nokia.
Funds they like: » A multisector global bond fund — For clients with fixed-income and balanced portfolios, this makes up the core of the fixed-income component. Holdings in Canadian debt, for example, take advantage of plays on both currency and commodities. Debt from Mexico, Brazil and the United Kingdom also have added to returns, says Moore.

Joseph A. Fernandez
Vice president and senior director
BNY Mellon Wealth Management, Miami

Assets under management: $3.2 billion (Florida)
Minimum investment: $1.5 million
Recommended international allocation: 25% to 30% (15% to 20% in developed countries and 5% to 10% in emerging markets)
Markets he likes: » Brazil — Materials and minerals have been strong, and now consumers are making themselves known. “Our view is that Brazil is going to continue to be a fairly strong performer,” says Fernandez. » China — China continues to be something of a juggernaut in terms of its economic growth, but it is something like a frontier, says Fernandez, adding that markets will develop more over time. » India — It has underperformed in the past, but Fernandez says the pluses are more developed financial markets, metals and mining, materials and industrials. » South Africa — “It’s something of an opportunity in the area of natural resources.” » Europe — Germany is in the second year of a three-year restructuring, and in the United Kingdom, the housing market as well as consumer products continue to be strong. » Japan — Its relatively high savings rate means a potential for increased consumer spending. Fernandez warns, though, that Japan is a large net importer of energy.
Markets he doesn’t like: » Russia — A lack of stability and events such as the government’s acquisition of energy giant Gazprom in 2006 have made Fernandez wary of investing here.

Charles A. Rodgers
Senior vice president and director of investments,
Miami-Dade region
Lydian, Miami

Assets under advisement: $17 billion
Minimum investment: Varies
Recommended international allocation: Varies with client, but typically international equities make up 25%.
International strategy: Typically two-thirds in developed nations and one-third in emerging markets.
Investing style: Global fundamental, bottoms-up focus. Rodgers says Lydian’s
managers “are less concerned with country and sector allocation” and look for the best companies in all sectors around the world. Using a variety of investments, including mutual funds and separately managed accounts, they take a strategic long-term approach rather than short-term moves.

Pat Antonetti
Senior vice president and financial consultant
Fort Pitt Capital, Naples

Assets under management: $1.2 billion (nationwide)
Minimum investment: $100,000 for a mutual fund portfolio, $500,000 for an individual securities account
Recommended international allocation: 29% for equity portfolios (22% in developed countries and 7% in emerging markets)
International strategy: Diverse international funds; no country-specific funds or exchange traded funds
Markets he likes: » Developed markets — Fort Pitt plays them through UMB Scout International (UMBWX), a growth and income fund, and Artisan International Value (ARTKX). » Emerging markets — The Forward Global Emerging Markets Fund (PGERX) invests in at least eight and up to 15 emerging markets. The Harding Loevner Emerging Markets Fund (HLEMX) typically holds 50 to 80 investments, including short-term or other debt, in at least 15 countries.