WELLS MANAGERS DID QUITE WELL IN PACIFIC: WHEN SOUTHEAST ASIA WENT SOUTH, STAGECOACH HAD GALLOPED AWAY

Smelling the smoke before feeling the flames, Wells Capital Management’s Katherine Schapiro pulled her common trust fund’s investments — representing 4% of assets — from Southeast Asia last spring. She also reduced its Hong Kong exposure from 8% to 2%.

That nimble maneuver helped her sidestep the Asian bloodbath that followed. By late September, when Ms. Schapiro and co-manager Stacey Ho launched the firm’s Stagecoach International Equity Fund, a clone of its common trust fund, they had only 13% invested in Asia. Japanese stocks alone represented 9%, with Hong Kong companies making up another 3% and Taiwanese stocks the remaining 1%.

In October, a month after its launch to the public, when the bottom fell out of markets like Korea and Indonesia, Stagecoach emerged relatively unscathed. It sank by 4.2% in the fourth quarter, far less than the Europe Australasia Far East Index’s 7.8% decline in the same period. Of course, when Asia bounced back in January, the fund returned 2.3% compared to 4.6% for the EAFE index.

The fund, which had assets of $51.7 million at press time, has since upped its Japanese stake by 4.4 percentage points. The fund’s Asian holdings now represent 17% of assets. Ms. Schapiro expects tax cuts and other government initiatives to spur the Japanese economy. She and Ms. Ho purchased more stock in Honda Motor Co. and also put money into a food company, a specialty store and consumer credit company.

The fund now has 57% of its assets in Europe, 5% in Canada, 4% in Latin America, 1% in Australia/New Zealand, 9% in other countries and 7% parked in cash.

Even though she appears to have dodged a bullet by having little of Stagecoach’s funds invested in Southeast Asia, Ms. Schapiro, who joined the firm’s parent, Wells Fargo & Co. in 1992, says she didn’t set out to limit Asian investments. Instead, she puts individual companies through a screening process and ranks them according to their valuation, earnings growth, risk and management team.

Among the stocks she unloaded: Cycle a
nd Carriage of Singapore, which sells Mercedes-Benz automobiles there, and Korea Electric Power Co.

Even though the managers consider themselves bottom-up, emphasizing stock selection over country selection, they generally will rule out countries with volatile political or financial conditions.

It’s difficult to dismiss the importance of a company’s home base when deciding whether to invest, says Tricia O. Rothschild, Morningstar’s international editor.

“It’s legitimate to do a combination of both,” Ms. Rothschild says. “That’s what a majority of funds do. It’s a decent approach.”