Fiona Biggs sets an example for conservative investors and working mothers.
Most days, you will find the 29-year-old Manhattan resident staying at home caring for her two young daughters. Around this demanding job she just happens to run Dreyfus Strategic World Investing, one of the better global mutual funds. "I have a phone, fax machine and Reuters (business wire) at home," she explains. "The foreign markets I follow are open at strange hours anyway."
What makes Biggs' fund special is that it's a global portfolio with good performance and low volatility. The notion that a fund holding foreign stocks or bonds can be low in risk might surprise some investors. But when you think about it, the idea makes perfect sense, as more markets allow for greater diversification.
Dreyfus Strategic World, which debuted in 1987, is one of two global portfolios that really stand out for low volatility. Another fund, SoGen International, has maintained a minimal-risk profile since 1978. It's run by Jean-Marie Eveillard, a 51-year-old Frenchman.
In fact, Eveillard sets the standard for low risk in the global area. Since taking over the helm of SoGen International in 1978, he has suffered just one down year--a modest 1% dip in 1990, when most global funds fell 4% to 10%.
"This fund is ideal for investors who want international exposure at minimal risk," asserts Morningstar Mutual Funds, a Chicago research publication that gives top five-star ratings to both SoGen International and Dreyfus Strategic World. According to Morningstar, both are less risky than either the typical domestic blue chip stock or balanced fund, despite their orientation toward foreign securities.
Yet Biggs and Eveillard couldn't be more dissimilar in investment style. This is partly explained by the fact that Dreyfus Strategic World is organized as a limited partnership rather than a corporation, the standard format for most mutual funds. "The partnership structure gives us wide latitude concerning the use of futures and options," Biggs says.
She uses these derivatives to reduce risk by hedging against either a falling stock market or a rising dollar (which would undercut the value of her foreign holdings). "It's very important to be able to hedge currencies," explains Biggs, who joined Dreyfus Strategic World at its inception. "Most global funds can't." She's also authorized by the fund's charter to short individual stocks, and frequently does.
Eveillard neither shorts stocks nor tries to hedge his foreign currency exposure. The currency sword cuts both ways, he notes, and at any rate tends to wash out over periods of four to five years or longer.
Another key distinction between the two funds relates to their respective management companies. SoGen International is a one-fund outfit, with no sister portfolios for investors to switch into if they want. Biggs' portfolio, by contrast, is part of the giant Dreyfus family, which counts more than 40 other mutual fund choices. Even though Strategic World is a conservative product designed for the long haul, investors can readily move their money around.
What both managers agree on is a generally pessimistic outlook for stock prices in this country and abroad.
Eveillard expects to see a continuingly sluggish economy in the United States and other key industrial nations, despite lower interest rates. "I feel we have entered a credit-contraction period, and that could prove painful for equities," he says. Still, he has 31% of SoGen International's assets in U.S. stocks and 16% more in foreign equities--a result of being able to find some good individual values.
Other key weightings include U.S. bonds (16%), foreign bonds (13%) and cash (19%). Eveillard even has a 6% stake in gold shares, more as a contrarian play than a bet on higher inflation. "Gold has been in a prolonged bear market for more than 10 years," he notes. "Yet everything is cyclical in life; there's no such thing as a bottomless pit."
Notably underweighted in SoGen International's portfolio (at less than 1% of total assets) are Japanese stocks. Eveillard expects to see another sharp selloff in Tokyo, triggered perhaps by a crash in the country's inflated real estate market.
Biggs has an even more defensive posture, with 60% of her fund in cash. She doesn't think the U.S. economy has turned around yet. "I expect another six months of recession and a slow recovery after that." American stocks account for only 7% of Dreyfus Strategic World's holdings, well below the 33% foreign-equity weighting. Her favorite international markets are Spain, France, Switzerland and, over the short haul, Japan, where she has 20% of the fund's assets invested.
And the differences go on and on. What Biggs and Eveillard share is a common concern for keeping risk to a minimum, even while delving into the volatile overseas arena. In short, they prove that international investing can be achieved in a conservative manner. And that's good news for Americans who realize that they need some foreign exposure but are afraid to take that first step.
How They Stack Up
Two fund managers with divergent styles have coaxed good performance and low volatility from global portfolios.
Fund: Dreyfus Strategic World Investing
Maximum sales charge: 3%
(plus 0.25% annual 12b-1 fee)
Assets: $45 million
Minimum purchase: $2,500
Manager: Fiona Biggs
Phone: (800) 648-9048
One-year return: +16%
Three-year return: +53%
Five-year return: *Not available (Fund was founded in 1987.)
Fund: SoGen International
Maximum sales charge: 3.75%
(plus 0.25% annual 12b-1 fee)
Assets: $287 million
Minimum purchase: $1,000
Phone: (800) 334-2143
Manager: Jean-Marie Eveillard
One-year return: +15%
Three-year return: +36%
Five-year return: +78%
Investment returns for period ending Sept. 30 provided by Lipper Analytical Services.