Even though international equity funds staged an impressive performance comeback in 1999 after dismal returns in the previous 10 years, international funds' average six percent decline so far this year has caused some investor disenchantment. As a result, a number of fund companies, including Scudder Kemper Investments of Boston, are changing or even closing their international funds.

Last year seemed to mark a reversal of fortune for international funds. They rose 27 percent on average, beating U.S. equity funds' 22 percent rise, according to Lipper Analytical Services of Summit, N.J.

That was a significant turnaround for international funds, which had a meager 3.88 average annualized performance between 1988 and 1998, according to Morningstar of Chicago. By comparison, U.S. domestic equity funds averaged a 15.15 percent annualized return in those 10 years, according to Morningstar.

But so far this year, global equity funds are in the doldrums once again, prompting a number of fund complexes to reconfigure or close their international funds. On average, international equity funds have declined in value 6.15 percent through March 31, while U.S. equity funds are up 1.67 percent, according to Lipper.

This has prompted Scudder Kemper to change the focus of its $7.8 million Kemper Emerging Markets Growth Fund and its $49 million Growth Fund of Spain. The Emerging Markets Growth Fund has returned 1.98 percent through March 31, while the Growth Fund of Spain is up 1.45 percent, according to Scudder Kemper.

These performance figures have the firm concerned, since the five-year average annualized return for the Growth Fund of Spain between March 31, 1995 and March 31, 2000 was 22 percent, while the Kemper Emerging Markets Growth Fund, which was introduced in January 1998, was up 40.14 percent for the 12 months ended March 31, 2000, said Amy Schwabro, a Scudder Kemper spokesperson.

Since the beginning of the year, there has been signficiant outflows of assets from the Growth Fund of Spain, said Schwabro. The Emerging Markets Growth Fund has had minimal inflows for the past year. She declined to disclose specific numbers.

These weakened returns and diminished flows have prompted Scudder Kemper to broaden the investment mandate of the Growth Fund of Spain and to rename it the Kemper International Research Fund as of April 27. Rather than operate as an open-end, country-specific fund, for which Scudder Kemper found little demand, the Kemper International Research Fund will be able to invest in companies in any country Scudder Kemper analysts find promising, Schwabro said. The fund will not be inclined to invest in any one country or required to rotate investments among countries, she said. Its new focus will be a bottom-up, stock-specific approach, she said.

The Kemper Emerging Markets Growth Fund, which previously operated with a top-down, macro-economic approach combined with bottom-up, equity-specific analysis, will also now focus only on a bottom-up approach, Schwabro said.

Scudder Kemper is hoping that these new investment approaches will help boost the funds' performance, she said.

Chase Manhattan of New York closed seven emerging market funds in early April and CIBC World Markets of New York will hold a shareholder meeting in July to vote on liquidating the CIBC Mexico Equity and Income Fund.

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