Rates Give Investments Overseas Greater Appeal

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NEW YORK -- Managers for wealthy investors are betting it's time to put their money in stocks and bonds outside the U.S.

"Managers are looking overseas because they expect a loosening of rates in Europe," said Charles Gradante, associate principal of WPG- Hennessee Hedge Fund Advisory, a New York-based consultant that matches managers with wealthy investors.

Lower rates lead to healthier stock and bond markets. As yields fall, prices of bonds rise. Company shares often jump on lower rates because they mean lower borrowing costs, which can lead to higher profits. So far in October, overseas investments seem to be panning out for managers who chase macroeconomic trends around the world and invest in everything from stocks and bonds to grains and currencies. These macro managers have, for example, been big on Italian, Canadian and New Zealand bond markets, said Patrick Moriarty, senior vice president at Norwalk-Connecticut-based Evaluation Associates. Canadian bonds with a 10-year maturity or greater climbed 9.5 percent in the past 30 days. Italian bonds rose about 6 percent, and New Zealand bonds jumped 7.9 percent. French, German and Italian equities, meanwhile rose between 3 percent and 5 percent, in local currency terms. "The macros had a lackluster September," said Gradante. "October looks better." Macro funds averaged a return of 1.74 percent in September, according to data compiled by WPG-Hennessee. In January, the best month this year, macro funds averaged 7.5 percent. In equities, "the general consensus is there's more value in Europe" than in the U.S., Gradante said. Managers are buying larger- cap stocks in financial, technology and transportation shares. Macro managers "are saying next year will be a down or boring market in the U.S., so that's why they are going overseas," Gradante said. Some of the biggest macro managers need a boost. George Soros' flagship Quantum fund dropped about 3.5 percent this year through Sept. 30. Mark Strome's offshore fund declined about 24 percent. By comparison, mutual funds -- targeted to less-well-off investors who don't have, say, a million bucks to invest in a hedge fund -- have climbed 12 percent through September, according to Lipper Analytical Services. The key to whether the bets in Europe will make money is falling interest rates. France lowered its rate on overnight loans between banks Monday to 3.31 percent. A cut in the call money rate, as it's called, often signals a cut in the Bank of France's official rates. Italy, which has boasted the best performing bond market this year, is still a favorite among investors. …


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