U.S. tax-exempt investors last year had $475 billion invested in international and global stocks and bonds, a 25% increase over a year earlier, a survey by InterSec Research Corp., Stamford, Conn., shows.
Still, last year's growth was below annualized levels for the past five years, when international/global investing by U.S. tax-exempt funds grew an annualized 30%.
Newly established portfolios were the big gainers for 1996, increasing 32%, to $34.1 billion, during the year. About 70% of last year's initial funding went to non-U.S. equities.
In comparison, additions to existing portfolios totaled $61.8 billion, up 12.6% over a year earlier.
Within investment categories, allocations to non-U.S. equities climbed 28% to $390.6 billion in 1996; fixed income, up 12% to $66.7 billion; and multiasset/balanced, up 22% to $17.8 billion.
InterSec's data shows initial funding for emerging markets equity allocations jumped to $4.9 billion vs. $2.3 billion a year earlier. Total emerging markets equity allocations stood at $35.2 billion at year end, compared with $21.8 billion a year earlier.
Spillover gains from the U.S. market's surge helped explain the rise in initial funding of foreign equities, said Carol Parker, InterSec's product development and research manager.
When tax-exempt funds rebalanced their portfolios because U.S. equities got above their targets, many put money into international equities, she noted.
Initial funding for foreign small-cap stock portfolios soared 276% to $1.2 billion in 1996. Total small-cap allocations were $10.1 billion at year-end 1996, vs. $7.8 billion at the end of 1995.
Overall, however, investors continued to favor broad international equity portfolios, which attracted the single largest chunk -$17.3 billion - of initial funding allocations last year.
Meanwhile, initial funding for Japan-only portfolios grew only 5% last year.
At $4.7 billion, the size of initial funding for international/global fixed-income portfolios dropped 39% from a year earlier.
InterSec's data also showed terminated international portfolios totaled $27.1 billion in 1996, up from $25.1 billion the year before. Investment withdrawals, however, dropped to $17.7 billion last year, down from $21.2 in 1995.