November 17, 2010

A New Fund For Currency Diversification.

As many of you know, I feel global currency diversification is essential to the long term prospects of an investment portfolio. More importantly it protects American investors from the lost purchasing power that would result from a decline in the U.S. dollar. For those investors that don't want the volatility of stocks, international non-dollar bonds can be an effective way to achieve this goal.

However, for many investors the amount of money needed to construct a truly diversified portfolio of international bonds is too great. Furthermore, we believe many clients prefer an actively managed product that is overseen by a portfolio manager who not only seeks to select high quality, undervalued bonds, but also monitors their performance and employs a disciplined investment process.

It's for this reason that we are proud to add a new fund to our product offerings at Euro Pacific Asset Management, LLC: the EuroPac International Bond Fund.

This new mutual fund seeks to preserve purchasing power and generate income, and is run by the same management team that heads the Euro Pacific wealth management division and the EuroPac International Value Fund: myself, as the Investment Committee Chairperson, and Jim Nelson, CFA, as the portfolio manager1.

As with all of our managed products, the fund will adhere to my preference for diversifying currency risk by investing in a number of countries with positive macro-economic fundamentals (including trade surpluses, low government debt, high interest rates relative to other nations and low inflation). The fund will invest primarily in investment grade government bonds, with the remainder dedicated to what we believe are undervalued corporate bonds from companies in attractive sectors with improving fundamentals. In many cases, these are bonds issued by the same companies held in the International Value Fund.

Because our team believes many countries are likely to see rising interest rates in the future, the initial preference of the fund will be to hold bonds of shorter duration. Although these bonds offer lower yields than longer term paper, they would likely show less volatility in a rising interest rate environment. However we believe the yield will be attractive compared to other bond portfolios concentrating on similar duration.


Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
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