Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Re: Unhedged International Bond Funds
Old 01-28-2005, 12:24 PM   #21
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
Re: Unhedged International Bond Funds

I carry about 10% international bonds in my portfolio, and have just switched from a mixture of various hedged funds to a single Pimco Foreign Bond (unhedged) position (PFUIX). It is a medium term bond with .5% fees.

The nice thing about foreign bonds as an asset class is their low correlation with anything else. They range from basically zero correlation with international large equities to .33% correlation with US bonds. (These are 1-year correlation coefficients). And their average returns are attractive for med term international bonds: about 8% over the past 10-20 years.

I got unhedged foreign bonds for the reasons stated in previous posts: I felt I was wasting my $ paying for hedges when what I really wanted was diversification into other currencies, so why would I want to pay for hedges?

I also dropped my previous hedged 2-year global bond fund from DFA, since all the return seemed to be eaten up in hedging costs,. There is no unhedged 2-year bond fund, so thinking about it I just said "Go Penfed CD" and now am locking in some cash yields that way.

with only pulling out 4% a year from the portfolio, I am not one of those who worries a lot about having everything in my base currency. I want diversification into good asset classes that move differently, so I can have low volatility and a reasonable return. (overall my portfolio produces historical returens of about 9% with standard deviation of about 7%, ie SP500 returns with half the volatility.)

This notion of a little more yield and no more risk (or less risk at the same yield) is the basis for the whole efficient frontier discussion, and is made possible through Modern Portfolio Theory benefits of diversification. (Bernstein, Armstrong). It is the closest I've found to investment alchemy and it works for me.
__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Unhedged International Bond Funds
Old 01-29-2005, 09:11 AM   #22
Thinks s/he gets paid by the post
Hyperborea's Avatar
 
Join Date: Sep 2002
Location: Silicon Valley
Posts: 1,008
Re: Unhedged International Bond Funds

Quote:
I carry about 10% international bonds in my portfolio, and have just switched from a mixture of various hedged funds to a single Pimco Foreign Bond (unhedged) position (PFUIX). *It is a medium term bond with .5% fees.
So, how are you getting the institutional version of the Pimco fund? The non-institutional ones (PFUAX, PFRCX, and PFBDX) have combinations of 12b-1 and redemption fees out the wazoo. You're not investing $5M in PFUIX are you? Or is it some sort of agglomeration through a planner?
Hyperborea is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-29-2005, 02:13 PM   #23
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
Re: Unhedged International Bond Funds

Hyper,
Yes, I have access to this fund through my fee-only DFA planner at less than the normal institutional minimum. It has worked for all the Pimco funds as well as things like QRAAX (commodiites).
__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-29-2005, 02:50 PM   #24
Recycles dryer sheets
 
Join Date: Oct 2004
Posts: 325
Re: Unhedged International Bond Funds

I thought about buying either a foreign currency position or a bond fund. *I thought it through and felt I would just be setting myself up for the same monetary devaluation problem that I am seeking to avoid leaving dollars for Euros, yen, pounds and so forth. *Every county spends too much and uses its currency and its international floating exchange as a form of operating capital. *Sooner or latter the currency will become subject to fiat decisions that crash its value.

I opted instead to invest in international commodity based funds and global equity market based funds as a way to counter the sell off of US soverignty. *All governments can print and collapse their curency, like the US is doing today, but global enterprise and especially global commodities are much truer residuals to value and will survive the enevitable collapse of any fiat currency. *(By the way, gold is not the answer...its a tool for con men and bunko artists) *

The dollars drop is really just another iterations of a much larger national agenda and is part of a process to make the US a "free trade" zone, and includes NAFTA, a no border policy, off shoring the industrial base and so on. *When the process finds its equilibrium we will wake up to find we live in the "new second world" economic phase of US history. *Global corporations will be, if they are not already, the real proxy for the power of nations.

My favorite "dollar proof" funds:

PCRDX (PIMCO REAL RETURN)
UMESX (EXCELSIOR NATURAL RESOURCES)
VHGEX (Vanguard Global Equity)

Check them out, they done well in real terms against any number of currencies.

LEX
__________________
"TEMPUS FUGIT"
LEX is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-29-2005, 06:07 PM   #25
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Houston
Posts: 1,448
Re: Unhedged International Bond Funds

Quote:
I opted instead to invest in international commodity based funds and global equity market based funds as a way to counter the sell off of US soverignty. *All governments can print and collapse their curency, like the US is doing today, but global enterprise and especially global commodities are much truer residuals to value and will survive the enevitable collapse of any fiat currency. *(By the way, gold is not the answer...its a tool for con men and bunko artists) *
1) Isn't a commodity based fund going to hold gold and other metals? Seems contradictory to your last statement.
2) How can global enterprise have "truer" value when the entire financial reporting system that we have set up depends on these fiat currencies? Sure, corporations have assets that should be fairly valued regardless of what the local currency is doing, but that still doesn't mean that they can always outlast currency manipulations by the government. Without a stable underlying currency to act as a store of value, I think corporations are going to have a tough time, regardless of how well the business itself is doing.
soupcxan is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-29-2005, 10:35 PM   #26
Recycles dryer sheets
 
Join Date: Oct 2004
Posts: 325
Re: Unhedged International Bond Funds

All good points; in the short term bonds can be very effective investments. *However, I spent my working life in oil and mining, and have developed my own investing methods which have worked for me and are in large part the reason I am now ER'd.

My basic premise is that I invest in assets, and keep a very light weighting in what I call IOU's, such as bonds or CD's. *I will keep about two - three years of liquidity in my accounts, but thats not what I consider working money, that's money that I have already harvested to live on. *I had this premise for asset based investing since the 1970's, though I would confine my investing exclusively to oil and mining companies. *It seems to work, at least for me.

The Commodity funds do have gold, but the main driver in these funds are the industrial commodities, including oil, which are so basic to any economy that it is as close a real metric of value for my purposes. *It is impossible for any government to "print more oil or copper" and dilute its intrinsic value, though each government can and does over produce its domestic resources, which is the source of the cyclical nature of the natural resources market. *

I refered earlier to my distain for gold promoters in the context of those that advocate owning gold as a form of currency surrogate. *Gold is still a vital industrial metal (theres gold and silver circuitry inside your computer) and at that level of market derives its value based on economic utility rather than arbitrary price transfers.

The fiat currencies may present a challenge to global equities, but these companies can do the curency hedging for me as an investor, and they will do that and more to preserve asset value, including inventory controls, marketing adjustments and so on. *Those that do not perform this type of asset preservation well will under perform and drop out of most rationally manged portfolios. So your point of currencies impacting some businesses is a valid one, but any fund manager is going to sell this business out of the mix and replace it with one that is going to make the numbers work. *I liken the funds to small darwininan engines, sorting out what works and what fails so that I can enjoy my tropical umbrella drink by the pool without much commercial concern. **In my opinion, based on my research, any well managed multinational, such as P&G or Coke, will move to prevent loss from a declining currency by price and market strategies in a much more effective mark to market than a government issueing its debt.

Finally, in a period of currency debasment, I want to own assets with intrinsic value, including real property, base metals, oil, and proven global business models, rather than financial instruments. These build and maintain the values that currencies attempt to passively measure. Its an Adam Smith thing....

This is what works for me, and seems to be as currency (and for that matter, country risk) nuetral as possible without forcing me into becoming a pit trader in the FOREX market. *8)
__________________
"TEMPUS FUGIT"
LEX is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-30-2005, 08:17 AM   #27
Thinks s/he gets paid by the post
charlie's Avatar
 
Join Date: Mar 2004
Location: Dallas
Posts: 1,211
Re: Unhedged International Bond Funds

Gentlemen, thank you for a very intelligent discussion.

If I may recap, Nords and Lex have indicated that
investing in unhedged foreign debt is not their
cup of tea while Brewer, Soupxcan and ESRbob
nod in the affirmative ..... Bob_Smith and Cut
remain neutral.

As for me, I can't decide so I will continue to ponder
for awhile longer.

Thanks,

Charlie
charlie is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-30-2005, 08:53 AM   #28
Recycles dryer sheets
 
Join Date: Oct 2004
Posts: 325
Re: Unhedged International Bond Funds

Chuck-Lyn:

I would suggest it more important that one controls their wealth, and not the other way around. Its all about the quality of life per dollar, however one measures this concept; life style quality is among the single most valuable assets any of us Er's have, no matter how we finance this wonderful state of affairs. "Keep your servants well managed and your tools well sharpened".
__________________
"TEMPUS FUGIT"
LEX is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 01-31-2005, 12:49 PM   #29
Thinks s/he gets paid by the post
 
Join Date: Jul 2004
Posts: 1,505
Re: Unhedged International Bond Funds

Yeah i invest with the same mindset, cut-throat. I've added a nice stake of international stocks to my domestic ones with the intent of both potentially enchancing returns while decreasing risk at the same time.

Williamson's "Low Risk Investing" had a chart in it that demonstrated this concept too. Granted, it wasnt very true in the 90s though.
azanon is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 02-02-2005, 08:24 PM   #30
Confused about dryer sheets
 
Join Date: Mar 2005
Posts: 4
Re: Unhedged International Bond Funds

Quote:
So, how are you getting the institutional version of the Pimco fund? The non-institutional ones (PFUAX, PFRCX, and PFBDX) have combinations of 12b-1 and redemption fees out the wazoo. You're not investing $5M in PFUIX are you? Or is it some sort of agglomeration through a planner?
Hello Hyperborea,

I understand that ESRBob is getting access through his planner. However , the Pimco Institutional funds are also available with a transaction fee at a number of brokers (Vanguard, Ameritrade+).

Oliver
oliver3 is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 02-03-2005, 11:00 AM   #31
Thinks s/he gets paid by the post
Hyperborea's Avatar
 
Join Date: Sep 2002
Location: Silicon Valley
Posts: 1,008
Re: Unhedged International Bond Funds

Quote:
Hello Hyperborea,

I understand that ESRBob is getting access through his planner. *However , the Pimco Institutional funds are also available with a transaction fee at a number of brokers (Vanguard, Ameritrade+).
Thanks Oliver. I'm not sure that my brokerage (TD Waterhouse) does. I'm also not sure that it is worth making the move for these nor if I would be moving for one benefit and still coming out about equal or worse.
Hyperborea is offline   Reply With Quote
Re: Unhedged International Bond Funds
Old 02-08-2005, 07:04 PM   #32
Confused about dryer sheets
 
Join Date: Mar 2005
Posts: 4
Re: Unhedged International Bond Funds

Hi Hyperborea,

TDW requires 100k unless you already own another institutional Pimco fund eg pcrix. If you do, you can exchange any amount into the new institutional fund.

Oliver
oliver3 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
International Currency ETFs vs Mutual Funds ESRBob FIRE and Money 1 04-28-2007 02:02 PM
Bond holdings - thoughts on switching funds? Lusitan FIRE and Money 6 04-04-2007 11:39 AM
Global bond funds LOL! FIRE and Money 10 02-27-2007 03:23 PM
Inverse bond funds - why the dismal performance? soupcxan FIRE and Money 1 02-08-2005 05:03 AM
Bond funds now? Roger_R FIRE and Money 2 06-02-2004 10:20 AM

» Quick Links

 
All times are GMT -6. The time now is 06:58 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.