cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Explorer ○

Where are the good unhedged international bond funds?

Looking for recommendations.  US based, and wanted a fund focused on international corporate debt--unhedged.  I couldn't find a reasonably-priced one with a good track record that was explicitly unhedged.  Some simply don't tell you one way or the other, which is frustrating.  Also, those that seemed unhedged often had large sovereign debt, which I have no desire to own right now.

I took a position in PICB as the "purest" play I could find, but I'm not keen on the ETF structure for illiquid bonds (see March 2020) and quite frankly the trading volume and AUM leave a lot to be desired.  I'm finding the spreads a bit too wide. In this market I'm deploying cash very slowly.

Anyone out there with an international unhedged bond fund you're happy with?

0 Kudos
8 Replies
Highlighted
Participant ○○○

Re: Where are the good unhedged international bond funds?


@unbiased2020 wrote:

Looking for recommendations.  US based, and wanted a fund focused on international corporate debt--unhedged.  I couldn't find a reasonably-priced one with a good track record that was explicitly unhedged.  Some simply don't tell you one way or the other, which is frustrating.  Also, those that seemed unhedged often had large sovereign debt, which I have no desire to own right now.

I took a position in PICB as the "purest" play I could find, but I'm not keen on the ETF structure for illiquid bonds (see March 2020) and quite frankly the trading volume and AUM leave a lot to be desired.  I'm finding the spreads a bit too wide. In this market I'm deploying cash very slowly.

Anyone out there with an international unhedged bond fund you're happy with?


I suppose you mean currency hedging? If so, I am curious why you are seeking unhedged funds??

0 Kudos
Highlighted
Participant ○○○

Re: Where are the good unhedged international bond funds?

PFUIX:

Access opportunities outside the U.S.

PIMCO International Bond Fund (Unhedged) is a globally diversified portfolio with the flexibility to invest in high-quality developed countries outside the U.S. By navigating exposures across different rate environments, growth dynamics, credit profiles, and policy objectives, the fund has demonstrated an ability to deliver attractive returns while reducing overall portfolio volatility.

Does this fit the bill for you?

0 Kudos
Highlighted
Explorer ○

Re: Where are the good unhedged international bond funds?


@SteadyEddy wrote:

I suppose you mean currency hedging? If so, I am curious why you are seeking unhedged funds??

Thanks for asking, sorry for the long answer but context will help.  After years of middling performance, I left LSBRX and moved my assets to PZTRX last year, to see that fund also crater despite its 5-star rating.  I can take some underperformance--and it may come back--but what really bothers me is that they refuse (yet) to issue updated quarterly commentary to explain the underperformance (unlike my other funds that also had underperformance).  Instead, their website is filled with outdated commentary and tons of marketing.  PGIM owes investors an explanation. 

Is it currency that dropped the fund?  EM exposure?  I don't know.  But when things go down I like to know why, and this is making me a bit soured on the "all-in-one" global bond as a class and I am dipping my tow in the water of "building my own" allocation.  I opened a small position in the US bond index (SWAGX) and also sell covered calls on TLT.  I picked up a US investment grade corporate and added some convertibles, high yield, and private credit.

So the last "category" missing is international bond.  I don't see too many reasons to own international for diversification unless it's also unhedged.  And I view now as a good time while the dollar is strong to take a dip.  Could be wrong, so I'm not betting the house on it.

On the PIMCO (PFUIX) fund, I appreciate the tip as it was the only one that consistently popped up as an option. I can only buy their A shares class, which is double the cost, and I don't quite understand what it is they own and what they do.  According to my portfolio tool, they are 40% US, but also "short" the US?  I'll need to do some more research so I can understand whether this fits in.  Appreciate it.

0 Kudos
Highlighted
Frequent Contributor

Re: Where are the good unhedged international bond funds?

@unbiased2020 , PFUAX is available as no-load, NTF at Fidelity and Schwab; ER 1.06% vs 0.66% for PFUIX.

In another thread, I found only 14-15 pure US corporate bond funds, so it isn't surprising that you cannot find many pure foreign corporate bond funds. But there are several global bond funds.

YBB
0 Kudos
Highlighted
Participant ○○○

Re: Where are the good unhedged international bond funds?


@unbiased2020 wrote:

Looking for recommendations.  US based, and wanted a fund focused on international corporate debt--unhedged.  I couldn't find a reasonably-priced one with a good track record that was explicitly unhedged.  Some simply don't tell you one way or the other, which is frustrating.  Also, those that seemed unhedged often had large sovereign debt, which I have no desire to own right now.

I took a position in PICB as the "purest" play I could find, but I'm not keen on the ETF structure for illiquid bonds (see March 2020) and quite frankly the trading volume and AUM leave a lot to be desired.  I'm finding the spreads a bit too wide. In this market I'm deploying cash very slowly.

Anyone out there with an international unhedged bond fund you're happy with?


I think the credit crunch we saw in March 2020 was extraordinary - which caught many active bond funds by surprise - bonds in general are not as liquid as stocks and when you add "rapid descent" to the market things go crazy. Glad that the Fed threw a lot at the market to stabilize the bond market.

Interesting approach you are taking in building your own bond allocation - please provide us updates to let us know how things are going. I am personally going back into the safe ballast corner of aggregate bond funds for the most part and take my risk in the equities.

All the best!

0 Kudos
Highlighted
Explorer ○

Re: Where are the good unhedged international bond funds?

Quick update -- closed my position in PICB.  It was the best  -- in theory -- but in practice the trading volumes are too light, bid/ask spreads too large, and asset base just a bit too low for my comfort.  The PIMCO fund is interesting, but has a bit too much government paper for my interests right now.  Honestly, if there's no good vehicle I might just revisit my plan and grudgingly rely on the skill of a global bond fund manager, despite my disappointment over the years with most of them.

0 Kudos
Highlighted
Explorer ○○

Re: Where are the good unhedged international bond funds?


@unbiased2020 wrote:

...The PIMCO fund is interesting, but has a bit too much government paper for my interests right now.  Honestly, if there's no good vehicle I might just revisit my plan and grudgingly rely on the skill of a global bond fund manager, despite my disappointment over the years with most of them.


Any thoughts re DODLX in that regard? Recently beaten up, but M* rates it 5* Silver in the "US Fund World Bond" category (same category as PFUIX). Current yield is 4.37%, duration is 3.20. 60% corporate, 25% government, the rest in securitized debt, muni debt, and cash (as of 3/31/2020). ER is 45 bps with a way lower entry point ($2,500) than PFUIX ($1,000,000 - ER 66 bps).

0 Kudos
Highlighted
Explorer ○

Re: Where are the good unhedged international bond funds?

Great tip.  I'm going to put this on my watch list.  I'll need to maybe wait a quarter to get a sense of their current EM stake (apparently was responsible for their underperformance) as I regrettably have another dedicated EM bond fund also in the toilet and don't want to overweight the sector.  Appreciate the suggestion.

0 Kudos
Announcements

Morningstar is here to help you respond to the Coronavirus crisis.