Fund Invests in Foreign Currency, Seeks Profit From Dollar’s Decline

International Assets Advisory Corp., a Winter Park, Fla., securities firm with offices in Irvine, said Friday that it is seeking to raise $100 million to invest in a closed-end mutual fund specializing in foreign currency and short-term debt investments.

The fund is described as a conservatively managed income fund that invests in both overseas currencies and short-term notes. The goal of the fund is to realize a return of 2% over prevailing rates for domestic 6-month bank certificate of deposits.

“By investing in securities on a global basis, the fund has the potential to benefit from shifts in currencies and yields,” said Dennis Hardaker, managing director of the firm’s Irvine branch.

The minimum investment is $2,500, or $2,000 for an IRA account. The fund is targeted at individual investors.

International Assets also said it has completed funding of a $50-million, closed-end mutual fund invested mostly in overseas stocks. Shares in the fund, called America’s All Seasons Fund, are traded on the over-the-counter market.

A closed-end mutual fund sells a limited number of shares to its initial investors, and those shares are later bought and sold on a stock exchange. An open-end fund, in contrast, continues to issue new shares as long as investors are interested in buying them, and it agrees to buy them back when investors decide to sell.

No performance results for the fund are available so far.

International Assets also manages $30 million for 16,000 individual accounts.

According to Hardaker, the firm’s model portfolio for individual accounts returned 24.5% in 1985, 95.7% in 1986 and 68% in 1987.

“The basic strategy was, in a period of dollar weakness, to be out of the dollar,” Hardaker said.

“In the last 3 years, if you put your money in a Japanese checking account and just let it sit there, you would be up 78% today” because the value of the dollar has declined against the yen, he said.

“If you had been in (German) deutsche marks, you’d be up 45%. And if you were in a CD in one of these currencies, you would have taken advantage of those currency gains, plus you would have earned interest,” he said.

Herbert Cohen, an investment adviser for the firm, said that the portfolios are currently diversified in a combination of Australian commercial paper with 1-year and 2-year maturities, deutsche mark CDs and short-term U.S. Treasury notes.

“What we are attempting to do is protect the investor from the decline in the U.S. dollar while providing appreciation in securities on a global basis,” Cohen said.

The new closed-end fund would make similar investments, Cohen added.

International Assets is a registered member of the National Assn. of Security Dealers and uses Prudential Bache Securities to handle its security transactions, Cohen said.

In addition to the Irvine office, which opened 18 months ago, the firm has three offices in Florida, and one in the Netherlands, Cohen said.