The purpose of this study is to investigate the performance of international mutual funds incorporated in the U. S. from the U.S. investor's point of view. Despite the importance and the dominating position of United State financial markets, little empirical work has been done on this subject. This study finds that the U.S. international mutual funds as a group outperformed the U.S. market in terms of both returns and risk. These funds generate substantial potential diversification gains in terms of U.S. risk reduction for U.S. Investors. The best funds are those funds investing most or all of their assets in foreign equity securities.