WEST PALM BEACH, FL (www.hedgeco.net) – Swings in the international currency markets are causing more risks for international hedge funds especially those funds that are not hedge against the dollarweakness. According to currency strategists, the decline of the dollar against the euro has benefited many international funds, but now that the dollar is beginning to rebound, the reverse is thecase.<\/p>\n
The dollar dropped by about 20 percent in the past 2 years, enabling international hedge funds to benefit from profits earned overseas. The dollar has recently gained 5 percent against the euro in 2005.<\/p>\n
Andrew Clark, a senior research analyst at fund research firm Lipper said, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdWith the dollar’s direction unclear, investors have to make two decisions about international funds.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd \u00c3\u00af\u00c2\u00bf\u00c2\u00bd Where do I invest overseas, and what’s going to happen to the currency?\u00c3\u00af\u00c2\u00bf\u00c2\u00bd, he asked.<\/p>\n
He further explained, \u00c3\u00af\u00c2\u00bf\u00c2\u00bd The only reason a fund manager should not be hedged is because they want to turbo-charge the returns, making a bet on the direction of the currency, adding to any returns made from the stocks,” he added.<\/p>\n
Clark wants hedge fund managers to break down for their investors how much money they make or lose during currency swings saying, “Your have no idea if your [European] fund last year made money because EU stocks did well or because the dollar weakened versus the euro, You may or may not find a clear statement on hedging in the [fund] prospectus.” He explained, “Some mention may be made of currency exposure as one of the risks of investing in the fund, but an actual statement of hedging policy is sort of rare.”<\/p>\n
The manager of Thornburg International Value Fund (TGVAX), Bill Fries said, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdWhat we really want to do is provide a level of insurance for the stocks that we do hold in a country that could be vulnerable, and we do that in a measured pace.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd<\/p>\n
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net<\/p>\n
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