When U.S. capital markets started to churn with the subprime mortgage implosion last summer, many investors went abroad in search of returns. Although the Standard & Poor's 500 index finished the year up 5.5 percent, the MSCI EAFE index, which covers developed economies outside the U.S., rose 11.2 percent. In some emerging markets returns were even better. Money managers benefited handsomely. The 50 biggest U.S.-based managers of non-U.S. stocks and bonds that make up Institutional Investor's annual America's Largest Overseas Investors ranking saw combined foreign holdings surge 21.9 percent, to $7.8 trillion, from December 2006 to December 2007. That was slower than 2006's 29.6 percent growth but still faster than the 16.8 percent of 2005. Some of that increase (roughly one third, estimates Julia Coro-nado, senior economist at Barclays Capital in New York) was a result of the weakening dollar; the rest came from net inflows and investment gains. Total global assets grew by 8.8 percent, to $24.7 trillion, with non-U.S. assets accounting for 31.6 percent of that total - 3.6 percentage points more than the year before.
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