Hedge Against € Collaspe

[Boscod]

Needless to say, like many others I pretty concerned about the state of the € at present, so I'm looking at moving some cash to a 'Hedged Global Fund'.

A couple of questions:

1 - The one I'm looking at is domiciled in Luxemburg, so, in the event of a € collaspe would my holding be converted to whatever currency Luxemburg goes with?

2 - The top holdings of the fund are US, Japanese and German government bonds. Again in the event of a collaspe, will the fund's value be protected (providing those bonds dont collaspe also) in real terms ?

Thanks

 

[Marc]

In my opinion this is a very good strategy.

Currency swings swamp bond prices so a euro hedge reduces volatility. This is typically achieved by entering into a one month forward swap contract so if the euro suddenly ceased to exist you would be left holding us treasuries gilts bunds etc which would presumably appreciate against the now dead Euro and it's replacements.

One point to bear in mind is that you will need to keep duration short and credit high the fund we use in our client's portfolios is an average AA+ credit rating and average 3 or 4 years duration. Holding longer term bonds significantly increases your risk but not your average expected return.

You would be better off spending your risk budget in equities rather than longer term or junk bonds.

Marc
Chartered and Certified financial planner

 

[Daithi7]

hmmm, Its certainly a euro hedge but bear in mind that government bonds such as those you mentioned that your money is now invested in are in an almighty bubble currently and this like all bubbles will pop at some stage.

 

[Cannon]

Inflation Linked Bond - Global

Thinking of placing percentage of funds in a product that slightly reduces the risk of losing lots through a Euro collapse. Again the bond concentrates primarily on American, Australian, UK, Japan bonds with access to funds when needed (within reason). Backed by the soverign states of each of the countries invested in and seemingly transluent charges. 1% set up charge and 1% annual management charge. The main reason for this product is primarily to protect capital. Can anyone play devils advocate before I go ahead.

 

[ringledman]

Thinking of placing percentage of funds in a product that slightly reduces the risk of losing lots through a Euro collapse. Again the bond concentrates primarily on American, Australian, UK, Japan bonds with access to funds when needed (within reason). Backed by the soverign states of each of the countries invested in and seemingly transluent charges. 1% set up charge and 1% annual management charge. The main reason for this product is primarily to protect capital. Can anyone play devils advocate before I go ahead.

Backed by the soverign states printing press!

We are living in a financial represion age. UK, USA, Japan and Eurozone all technically bust.

Oz somewhat better.

I think an ok investment for smal alocation provided one`s portfolio also has precious metals, commercial property, equities, commercial bonds, commodity global exposure.

DYOR.

 

[Cannon]

Thanks Ringledman, It is only part of a portfolio I am trying to create for a nearest and dearest. I am also interested in what rory gillan is doing and educating myself on a wider range of products.