(PUB) Investing 2015

What happens when the Federal Reserve raises rates

while the rest of the world is cutting rates? A huge

dollar rally. That’s what we had up until mid-March

when Fed Chairman Janet Yellen expressed concerns

about the surging dollar. The news spurred a euro

rally, but it doesn’t change the fact that the dollar

may well continue to gain ground over the rest

of the year.

That leads me to my theme of dollar-hedged invest-

ments. In general, I prefer funds that don’t hedge

because I want currency diversification even though

it means greater volatility. In addition, currency

hedging has an added cost that seems unnecessary,

as currency moves tend to wash out over time.

Yet an investor at or near retirement might prefer not

to take on the added risk. In addition, the current

environment seems to make a dollar rally more likely

even though one can never be certain about macro-

economic forecasts. With all that in mind, I’ve

selected a few of my favorite dollar-hedged ideas.

Keep in mind the dollar rally has boosted returns

for all these funds so far in

2015

Tweedy, Browne Global Value

TBGVX

This fund has a nice cautious value approach in the

Warren Buffett style. The chief difference is

that management of this fund prefers a more diffuse

portfolio than Buffett’s. In addition, it owns a fair

amount of small and mid-caps, which provide greater

diversification than foreign large caps. Over time

this fund has produced great results, and we’ve been

impressed by management’s stability in the face

of a generational hand-off. We give the fund a Morn-

ingstar Analyst Rating of Silver, though its one

drawback is fees that aren’t great.

Vanguard Global Minimum Volatility

VMVFX

This fairly new fund follows a global equity index

slanted toward less volatile stocks. To further reduce

volatility, Vanguard hedges currency risk—a major

source of volatility with foreign equities. Naturally,

it is supercheap, with a price tag of just

30%

. The

fund is

55%

invested in North America,

20%

Europe, and

22%

in Asia. If your goal is to bet on a

rally versus the euro, this is the right fund, but it

makes for an appealing core holding, too.

IShares Currency Hedged MSCI EMU

HEZU

This exchange-traded fund tracks a

MSCI

Europe

index and then hedges the currency exposure.

The fund is cheaper than actively managed funds, but

its expense ratio of

51%

is pricier than Europe

index funds that don’t hedge. So, you clearly need to

put some value on that hedging to choose this fund.

PIMCO Foreign Bond (USD-Hedged)

PFODX

PIMCO

makes this fund available in hedged

and unhedged versions. The hedged version is signifi-

cantly less volatile, so it’s not a bad idea. Specifi-

cally, its five-year standard deviation is

versus

for

PIMCO Foreign Bond (Unhedged)

PFBDX

Andrew Balls was named manager last year amid

the Bill Gross tumult because former manager Scott

Mathers was named lead manager of

PIMCO

Total Return

PTTRX

. We trimmed our rating to

Bronze as a result, but Balls can tap a deep

team of analysts and traders, and we still think

this is a strong option.

Sheltering From the Dollar Rally

The Contrarian

Russel Kinnel

Our Contrarian Approach

I go against the grain to

find overlooked funds that may

be ready to rally.