Last week, I asked six advisers if they invest in international bonds
and whether the average investor should. Here were their responses.
Sarah W. Quist, marketing director of Vision Capital Management Inc. in Portland:
"With the economic instability overseas, currency fluctuations and raising global interest rates, we will continue to maintain a relative small allocation to multinational bonds. For most of our clients, the intended purpose of the fixed income allocation of their portfolio is stability and income."
Rick Ferri, chartered financial analyst and author of "The Power of Passive Investing":
"The costs are too high and the diversification benefits are too low. This includes the new Vanguard fund. We have no interest in these products, but they sure sound good, and that's what people are buying."
William Bernstein, author of "The Intelligent Asset Allocator" and Portland financial adviser:
"Our allocation to international bonds is zero. It's just not worth the trouble for the slightly added diversification, particularly considering the tax complications of intermittent hedging profits."
Dougal Williams, chartered financial analyst and chief investment officer, Vista Capital Partners in Portland:
"International government bonds have historically exhibited low correlation to U.S. and international stocks, particularly during times of extreme stock market stress/pessimism. That is precisely why they are such a good portfolio diversifier. Like U.S. Treasury bonds, they hold up when you need them to (that is, when stocks tank)."
Scott Conyers, chartered financial analyst with Scott Conyers Capital Management in Aurora:
"Well, as you've heard me say, when the bond salesmen sirens call you into the asset class, and out on the maturity curve when you get there, it's time to stop up your ears with wax."
Marc Fovinci, charterd financial analyst at Ferguson Wellman Capital Management in Portland:
"For the average retail investor, we'd say there is no requirement to hold them, but, if you do hold them, allocate only a few percent to them. ... In general, a minority of our clients hold international bonds. We feel the risks, returns and diversification benefits of international bonds are largely covered by international equities and domestic bonds."
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