What's Happening With Your Foreign Funds

International funds are suffering—some more than others.

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So far this year, international funds of all flavors have suffered steep losses. Most developed markets, from the UK to Japan, are down 10 percent to 20 percent, reports Morningstar, and most emerging markets—especially those heavy on natural resources—have posted even greater declines. The reasons mirror many of the problems in the United States: credit woes, rising inflation, a cutback in consumer spending, and fears of a global recession. (On that note, a Citi report released today says worries over the global economy are "overdone" and that a modest slowdown is underway.)

Chances are your international funds are down. Morningstar provides some context: Every international fund it tracks that's available to retail investors is in the red so far this year. Foreign funds that invest in large companies are down an average of about 16 percent. Funds that invest in small and midsize value-oriented companies have dropped the same amount, and those that buy small and midsize companies with a growth bent are down even more.

Morningstar highlights two otherwise solid funds that have posted larger-than-average losses. One is Artisan International Small Cap, which has dropped nearly 25 percent so far this year, versus an 18.7 percent average loss for its category. Behind the decline are its geographic exposure, sector overweights and underweights (which reflect how much exposure a fund has to an industry, compared with its benchmark index), and individual stock picks, Morningstar says. Versus its peers, Artisan's portfolio is relatively heavy on China and Hong Kong, which have both been posting steep declines, and lighter on Japan, which has suffered less. The fund also holds a bigger stake in the financial sector and a smaller stake in the healthcare sector (which tends to hold up well in down markets) than most of its rivals.

Morningstar says it still has faith in the fund because of its long-term record.