AS making money from local stocks becomes an increasingly slippery business, more and more investors are casting the net wider. International funds are now the fastest-growing sector in the unit trust industry, according to third-quarter sales figures released this month by the Hong Kong Investment Funds' Association. Global equity and bond funds pulled in US$31.75 million (about HK$245.52 million) in new money in September, easily eclipsing all other sectors. The next most popular destination, Hong Kong equity funds, brought in a relatively slender US$6.6 million. Many other areas went backwards. The Japanese equity sector, the single Asian countries sector, the Asia-Pacific regional sector and the emerging markets sector all had modest outflows. Andrew Lo, vice-chairman of the association, said: 'By providing a mixed portfolio, funds under the international sector enable investors to capitalise on the worldwide investment opportunities effectively and this probably accounts for the increased interest in the sector.' International funds enable investors to diversify their holdings across sectors and industries that might not be available in single-country Asian funds. Stewart Aldcroft, marketing and sales director for Templeton Investment Services (Asia), said: 'Many Asian countries don't have high technology and automobile industries. Investing in international funds lets you have access to both.' Global funds are also attractive for long-term investors as they remove the problems of considering asset allocation between various countries. In addition, they are the least volatile and most certain of all investment funds. According to Micropal, the statistics company, the 47 Hong Kong-authorised equity funds are about half as volatile as emerging market funds and about one-third as volatile as Hong Kong equity funds. Despite their growing popularity, international funds do not generally match the highs - or lows - of their specialist counterparts. Over the last three months, the 47 international funds have dropped an average of 0.5 per cent. Over 12 months, they have added a mere 3.4 per cent. In contrast, European funds have grown at an average of 10.5 per cent over the past year and North American equity funds have advanced by 23.6 per cent. A survey of eight of the most popular Hong Kong international funds shows their holdings are heavily weighted towards the United States, Japan and Europe. Current holdings in US equities are as high as 41.7 per cent in the BT International Growth Fund and 35 per cent in the Fidelity Investments International Fund. Japanese equities are also in favour with four of the funds holding more than 20 per cent of their assets in Japanese stocks. Invesco Asia PS Global Growth Fund tops the list with 26.1 per cent. European equities are also in fashion. Jardine Fleming Global Securities Trust holds 33.4 per cent in continental European stocks. Significant holdings in emerging markets are generally avoided. Only three of the funds have any interest in South American equities. The outlook for international funds remains positive, according to most of the fund managers. Willie Holzer, fund manager for Scudder's Strategic Global Themes Fund, said the outlook for the global investment environment was friendly due to falling interest rates and rising profits.