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DOMESTIC FUND MANAGERS can be forgiven for wanting to search out good stock picks in other countries. According to Lipper, world equity funds have returned an average annual 7.2% the last two years, while their counterparts here in the States eked out just a 2.8% gain during that same time period.

But some managers, even if they wanted to, can't go shopping overseas because the investing mandates outlined in their funds' prospectuses prohibit such a move. That means investors usually have to resort to buying one fund for their U.S. exposure and another for their international coverage. In other words, they need to do double the homework in order to round out their portfolios.

The fund industry, though, has a one-size-fits-all option called a global fund. These funds typically have a foothold here in the U.S. maybe 40% to 50% of their portfolios in addition to owning stocks in areas like Europe and Asia and, in some cases, emerging markets, too.

This week the SmartMoney.com fund screen focuses on this category. We started with a universe of 1,969 global/international funds and quickly whittled that list down to 255 by excluding load funds. We looked for funds that had significant exposure to the U.S. and overseas markets vs. just pure-play international offerings. The funds' performance track records during the trailing three- and five-year time periods put them in the top 40% of their peer group. In addition, the funds had to charge cheap fees and be open to new investors. Once we accounted for all that criteria, we were left with six funds. They are listed on the table below.

There are some compelling reasons to explore a global fund. As we mentioned, it's an easy way to get instant diversification without doing the leg work to find three or four or five separate funds. Indeed, these offerings make good core holdings. And since investors just have to buy one product, it keeps fees to a minimum. That sounds smart to us.

Of course, there are drawbacks, too. Sometimes a one-size-fits-all option isn't the best idea. That's because a global fund, at least the ones that track a static index, will stay invested in the same countries and companies regardless of market conditions. Even one run by a manager can be overweight certain regions or countries. That can defeat the original diversification idea.

A savvy investor who owns a few funds, though, could ratchet up or down his exposure to certain parts of the world as, say, Japan cools off and Europe heats up. That's a particularly important point these days. Over the last few years many investors have placed bets on emerging markets. Jeffrey Kleintop, chief market strategist for LPL Financial, thinks that as inflation decreases it will lead to a rebound in U.S. stocks while emerging markets will pull back. "This slowdown," he said in a recent note, "appears to be unfolding." If that is indeed the case, an investor could pare back on the fund he or she owns that invests in emerging markets while buying more of the one that focuses on the U.S. A global fund owner may not be able to get out of the way.

The global concept has become a popular one in the fund world. The exchange-traded-fund industry recently launched global funds, including the iShares MSCI ACWI Index ETF. The fund charges annual fees of $35 for every $10,000 invested and tracks an index of 706 stocks spread out in 39 countries. The U.S. accounts for 41% of the fund's holdings. But companies in Japan, the U.K., France and Brazil are also present. Top holdings include Exxon Mobil, General Electric, BP, Petrobras and HSBC. Click here to see our take on other global ETFs. Vanguard got into the mix in June when it launched its Total World Stock Index mutual fund. This fund tracks an index of 2,900 stocks in 47 countries. Its estimated expense ratio is 0.45%.

A solid actively managed fund in this space is T. Rowe Price Global Stock, managed by Robert Gensler. He has positioned the portfolio with a 40% weighting in the U.S., 24% in the U.K. and Western Europe, and the rest spread out in countries like Brazil (7%) and India (6%). This $1.2 billion fund charges a 0.87% annual expense ratio, a cheap price tag for a manager who can navigate the world for you. The fund has returned an average 15.6% the last five years, which puts it in the top 6% of its category.

The Criteria: The funds on our list this week are classified by Lipper as global funds. The funds had to have significant exposure to the U.S., be open to new money, require a minimum investment under $5,000 and charge an annual expense ratio less than 1.5%. In addition, their performance track records had to be good enough to put them in the top 40% of their category.

Also See:

• 25 Funds With Good Returns Since Inception

• Five Emerging-Markets Funds to Explore

• 7 Funds Worth Their High Minimums

See the Fund Screen Table

Spanning the Globe
Ticker	Name	Assets ($ mil.)	Year-to-Date Return (%)	3-Year Average Annual Return (%)	5-Year Average Annual Return (%)	Expense Ratio (%)
	DWS Global Thematic	1,190	-14.9	10.5	14.9	1.18
	Fidelity Worldwide	1,535	-11.8	10.6	13.2	1.04
	Oakmark Global	2,423	-13.2	7.6	13.0	1.13
	T. Rowe Price Global Stock	1,185	-12.9	13.6	15.9	0.87
	USAA Capital Growth*	830	-11.9	8.2	12.8	1.16
	USAA World Growth*	503	-10.5	8.6	12.5	1.30

Source: Lipper

Note: Data as of July 30, 2008

* Must have an account with the company to purchase shares

Global Fund Screen Recipe

Fund Type = Global/International *

Annualized 3-Year Return (%) = Display Only

Rank in Classification (%) (3 year performance) <= 40

Annualized 5-Year Return (%) = Display Only

Rank in Classification (%) (5 year performance) <= 40

Expense Ratio <= 1.5%

Load Fund (type) = No Load

Minimum Initial Investment <= 5,000

Open to New Investors = Yes

Total Net Assets ($ millions) >= 50

1-Year Return (%) = Display Only

* The funds on this list must have a substantial portion of their assets invested in the U.S.