Over the past several weeks we’ve been discussing my favorite mutual funds. These funds were selected based on an in-depth, in-house analysis; last week I shared my favorite picks in global and emerging market funds.
Starting with this post, we’ll turn our attention to alternative mutual funds. There are seven additional categories to cover. Let’s begin with currency and equity long-short.
For several years I used ETFs to play the currency markets. The task was to get in and out as market conditions warranted. Although I was able to do this, to do it well, and stay abreast of all the other material information an advisor must monitor, it did increase my burden. To simplify matters, I sought a fund (or ETF) that would make those tactical decisions for me. My journey led me straight to the Franklin Templeton Hard Currency Adv fund (ICHHX). This fund has been in the top performance quartile in eight of the past 11 years. During 2006-08 it fell into the second quartile. To be fair, from 2001 to 2005 when it was in the first percentile, there were only two other currency funds. Today there are 79 and ICHHX still ranks near the top. The current management team has been in place for 6.5 years. This fund has had a high correlation with the S&P 500 over the past three years at 0.81, but it has been lower over the trailing five-year period at 0.65. My typical allocation for this fund is normally less than 5% of a portfolio.