PIMCO Foreign Bond (USD-Hedged) IPFORX

Morningstar Rating

Fund Research and Analysis

by Arijit Dutta

Management's best laid plans went awry last year, but PIMCO Foreign Bond (U.S. Dollar-Hedged) is back in contention.

This Analyst Pick's 3% loss in 2008 was among the more disappointing results in the world-bond category, especially because other hedged funds made the most of the dollar's "safe-haven" surge last year. Read more

Kudos

Comes from a strong family: PIMCO is one of the best bond shops around.

Willingness to set its own course increases its chances of posting superior results.

Seasoned manager with exceptional resources at his disposal.

Reasonable expenses. Read more

Risks

Likely to underperform relative to other international-bond funds when the U.S. dollar is weak.

The fund's complex strategy, which makes extensive use of derivatives, is difficult to execute well and comes with real risks. Read more

Strategy

Management invests the bulk of its assets overseas, primarily in government-issued bonds. It hedges most of its currency exposure back into the dollar, so the fund offers little in the way of currency diversification. Read more

Management

Scott Mather has replaced Sudi Mariappa in leading PIMCO's global portfolio-management team. Mariappa had come to PIMCO in 2000 from Merrill Lynch but retired in early 2008. Mather, who joined the firm in 1998, also now manages Analyst Pick PIMCO Foreign Bond (Unhedged) PFBDX. Read more

Inside Scoop

Unlike some of its international-bond competitors, this fund offers investors little in the way of currency diversification. But its steady approach and strong long-term returns should win it fans among those looking to add foreign flavor to their bond portfolios. Read more

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