Foreign Bond Funds not currency hedged with low expense ratios?

[bamsphd]

I am thinking about possibly diversifying my bond investments internationally. I'm normally a cheapskate Vanguard index fund investor. However, I'm not enamored with Vanguard's international bond offerings.

I'm looking for a fund or ETF which invests internationally in a wide portfolio of generally highly rated bonds. A low expense ratio is critical. I don't want to pay more for bonds than the 0.15% I currently pay for Vanguard's Emerging Market Index Admiral shares. I would also strongly prefer no currency hedging which I consider a hidden expense which also removes some of the diversification benefit.

Does such a product exist?

 

[panacea]

I don't know of any bond fund or ETF like that at an index-like cost. You may have to be willing to pay more for that kind of investment.

 

[bamsphd]

If only IAGG was not hedged. Unfortunately, its prospectus explicitly says:

The Underlying Index is designed to have higher returns than an equivalent unhedged investment when the component currencies are weakening relative to the U.S. dollar and appreciation in some of the component currencies does not exceed the aggregate depreciation of the others. Conversely, the Underlying Index is designed to have lower returns than an equivalent unhedged investment when the component currencies, on a net basis, are rising relative to the U.S. dollar

Here are the lowest expense ratio alternatives I found:

IAGG	iShares Core International Aggregate Bond ETF	0.11%	Hedged
BNDX	Total International Bond ETF (Vanguard)	0.20%	Hedged
IGVT	Deutsche X-trackers Barclays International Treasury Bond Hedged ETF	0.25%	Hedged
IFIX	Deutsche X-trackers Barclays International Corporate Bond Hedged ETF	0.30%	Hedged
IGOV	iShares International Treasury Bond ETF	0.35%	unhedged
BWZ	SPDR Barclays Capital Short Term International Treasury Bond ETF	0.35%	unhedged
ISHG	iShares 1-3 Year International Treasury Bond ETF	0.35%	unhedged
PGHY	PowerShares Global Short Term High Yield Bond Portfolio ETF	0.35%	unhedged

(Double check for typos and read the prospectus before investing!)

 

[Onward]

An unhedged foreign bond fund is more of a bet on currency fluctuation than it is on bond performance.

Just be aware of what you're investing in.

 

[DrRoy]

An unhedged foreign bond fund is more of a bet on currency fluctuation than it is on bond performance.

Just be aware of what you're investing in.

+1 The currency moves could easily wipe out the bond return.