IT WASN'T TOO

long ago when simply buying a few shares of

Disney

In our (mostly) capitalist society, public markets have thankfully come a long way. International investing, once only within the grasp of wealthy individuals and large institutions, has also been democratized, with once obscure and unattainable markets now easily and inexpensively traded by investors of every size. Moreover, the innovation has moved long beyond simply stocks. This week we'll highlight three new funds that allow investors to participate in world markets that would have been virtually impossible just a few short years ago. Each offers a unique exposure to a different geographic area of the world.

As Americans, we're long used to our country being the world's most important economy and our currency being the benchmark against which all others are judged. What prompts tens of thousands of Mexicans, for example, to risk their lives crossing a hot desert is the opportunity to work and build a life, even "off the books," in the United States. As an unquestionably stronger engine, we've almost come to take Mexico's economic subservience for gratitude.

Yet as much as the Minutemen might not want to admit it, Mexico has quietly turned into one of the world's most promising investments. Since the tech bubble burst in early 2000, Mexican stocks have outperformed domestic issues by a wide margin. The benchmark IPC is up by roughly 100% in the last two years alone.

As I wrote about a few weeks back, Rydex has introduced a series of innovative ETFs that hold foreign currency, offering an ideal product for U.S. investors looking to hedge their exposure to the greenback. Considering the extent to which Mexico's stock market has trounced ours in recent years, now may be the time its currency does so as well.

CurrencyShares Mexican Peso Trust tracks the value of the Mexican peso relative to the U.S. dollar. Each share of the fund holds 1,000 pesos, and because the currency is held in interest-bearing accounts, the fund sports an annual yield of 5.57%, paid monthly. Yearly fees are a reasonable 0.40%, which is modest considering one need not constantly roll over futures contracts to get the same exposure.

And although all have gained since their debut, even the most adventurous investors should note the peso fund is not only the most volatile of the newly launched CurrencyShares, but the least liquid as well. Last Friday, for example, the fund traded 900 shares...the entire day. The gas station by your house does far more business. Thankfully, market makers keep spreads tight with several thousand shares almost always available on the bid or offer.

The benefits of regular dividends have been long documented, with numerous studies indicating that upwards of 40% of the market's total return can be directly attributed to reinvested dividends. From January 1926 through December 2004, for example, stocks provided an annual average return of 10.5%, with only 6.1% of that stemming from price appreciation.

Around the World in Three Ways

A myriad of new products, such as iShares Dow Jones Select Dividend Index Fund and streetTRACKS SPDR Dividend ETF, have made gaining exposure to a domestic high-dividend strategy almost effortless. Pushing the bar even higher is upstart ETF provider WisdomTree, which has garnered substantial press and assets with its midsummer launch of various funds that use index methodology not based on market capitalization, but on the amount of cash dividends paid. Companies that pay higher amounts of cash dividends or that have higher dividend yields dominate their indexes, as opposed to simply those with the largest market capitalizations.

Given the persistent outperformance of foreign markets, most intriguing to me is the WisdomTree Europe High-Yielding Equity Fund, which offers a pure-play for many of Europe's juiciest yielding stocks. The index on which the fund is based screens for basic liquidity and market capitalization requirements, with the highest 30% of dividend-paying companies selected for inclusion. Financial, energy and communication are the highest-rated sectors, with an average P/E ratio of 13.22. The fund currently yields near 5%.

Most of the large, European blue-chips are included, with banking giant

HSBC Holdings

BP Plc

ENI Spa

Lloyds Group

Barclays Plc

In general, the fund offers easy exposure to high quality, large-cap European stocks with juicy dividends. For someone assembling a long-term international portfolio, this could serve as a core holding. The value offered by the fund is a clearly defined strategy available in one simple transaction. Previously, one would have had to spend significant commission dollars buying individual ADRs, with many of the fund's holdings not traded in the U.S. at all. Although volume is still rather light, modest size orders are filled quickly with relatively modest spreads.

Finally, from Europe we go to the Far East, where an unusual new closed-end fund offers exposure to an asset class virtually unowned by most domestic investors. RMR Asia Pacific Realty Fund invests primarily in the securities of Asian real-estate companies, the vast majority of which don't trade in the U.S.

Longtime readers will recall that we've highlighted international real estate frequently over the years, beginning with Alpine International Real Estate Equity fund back in 2002, ING Clarion Global Real Estate Income fund in 2004 and Cohen & Steers Worldwide Realty Incomeearlier this year.

This more recent offering is unique for its geographic focus on Asia. Thirty-eight percent of the fund's holdings are in Japan, with the balance in Hong Kong (27%), Australia (18%), Singapore (8%), and Thailand (7%). While most investors believe real estate in the United States to be exceedingly overvalued, Asian assets might prove to be comparatively cheap. It was recently reported that Japanese land prices, for example, rose in value in 2005 for the first time in 14 years.

The fund's most recent update shows top holdings including Mitsubishi Estate, and Sumitomo Realty and Development, both with diversified holdings in Japan and Hang Lung Properties, with exposure in Hong Kong and China.

Although it has traded lower since its late May IPO, the fund is now trading at an 8% discount to its net asset value, giving domestic investors an easy way to get exposure to Asian real-estate assets on the cheap.

Jonathan Hoenig is managing member at

Hedge Fund LLC. At the time of writing, Hoenig's fund held positions in many of the securities mentioned.