Betting on Dollar's Ups and Downs; Franklin Must Vie With New Outlets For Followers of Currency Fluctuations
The Franklin Templeton Hard Currency Fund (ICPHX), the oldest U.S. mutual fund that bets against the dollar, had a successful run during the past three years as the dollar lost value. So far, 2005 has been a different story.</br></br>The 16-year-old fund is down 3.4 percent this year as the U.S. currency has rebounded against currencies, including the euro and the Canadian dollar, the fund's two biggest holdings. Michael Hasenstab, the $207 million fund's co-manager in San Mateo, Calif., says deep-rooted economic problems such as the bloated U.S. trade deficit will push the dollar lower again over time.</br></br>"There's a bit of a disconnect between fundamental developments and short-term movements in the dollar," said Hasenstab, 31, who has worked at Franklin since 1995.</br></br>Hasenstab and co-manager Alex Calvo, 41, have more than a rising dollar to contend with. Their fund also faces competition from a batch of new rivals. ProFund Advisors LLC, Rydex Investments, Merk Investments LLC and Potomac Funds are lining up to offer six new U.S. currency funds, four of which are designed to go up when the dollar goes down.</br></br>Demand for such funds faltered in the late 1990s when both U.S. stocks and the dollar were rallying. Franklin Resources Inc., the parent company, tried to merge the Hard Currency Fund with another fund in 2001, after assets fell to $33.6 million in October 2000. Fidelity Investments, the world's biggest mutual fund manager, closed three U.S. currency funds in 1997, citing insufficient demand.