BGF US Dollar Reserve Fund - Hedged (GBP) - Class A
Summary of Investment Objective
The US Dollar Reserve Fund seeks to maximise current income consistent with preservation of capital and liquidity. The Fund invests at least 90% of its total assets in investment grade fixed income transferable securities denominated in US dollars and US dollar cash. The weighted average maturity of the Fund's assets will be 60 days or less.
Fund Manager's Report (as at Jun 30, 2010)
The Fund returned 0.0% over the quarter. During the quarter, the US dollar strengthened versus the euro. the currency hedge underlying this share class prevented returns in the hedged share class reflecting this trend.
Assets remained stable throughout the period. In efforts to mitigate ultra-low quarter-end reinvestment rates, cash was invested primarily in commercial paper, Treasury bills and bank deposits 45-days and in. Overnight investments on quarter-end traded in a very low range, opening up a yield of 0.03% and quickly trading down to zero. In efforts to avoid such rates, overnight and ultra-short liquidity percentages were decreased. However, 30-day and in liquidity remained plentiful at an estimated 40% of assets.
With the Federal Open Market Committee (FOMC) reiterating that interest rates will remain low 'for an extended period' and continued softness in the labour and housing markets, we will maintain the strategy of selectively looking for opportunities to extend out the curve when highly liquid, strongly rated credit opportunities present themselves. It is also our intention to maintain ample amounts of front-end liquidity via traditional short-dated money market instruments.
Fund Fact (as at Jul 31, 2010 )
| Status | Sub-Fund of Luxembourg SICAV |
| Fund Manager | Coleen Gasiewski/ Chris Linsky |
| Launch Date | Nov 30, 1993 |
| Base Currency | USD ($) |
| Additional Dealing Currencies | GBP (£) |
| Benchmark | 7 Day USD LIBID |
| Morningstar Sector | Money Market USD |
| Total Fund Size (m) | USD ($) 290.2 |
| EUSD Fund Attributes | |
| EUSD Fund Status | in scope, distributions and redemptions |
| Information Source | Portfolio Composition |
| Application Threshold | >40% |
| Holding in Debt Claims | 96.57% |
| Grandfathered Bonds Held | 0.46% |
| Application Start Date | Jan 1, 2010 |
| Application End Date | Dec 31, 2010 |
| TID | 0.000000000 |
| Last Distribution Date | Aug 19, 2010 |
| Fees | % |
| Annual Management Fee (A shares) | 0.45 |
| Initial Charge (A shares) | 0 |
| Codes | |
| Bloomberg Equity Ticker | MIGSDRI LX |
| Reuters Page Id | BLRKIJ |
| Swiss Valoren Number | 138733 |
| CUSIP | L1049K582 |
| Fund Risk Statistics | |||
|---|---|---|---|
| Volatility (Annualised Standard Deviation) | 3 Years | 5 Years | Since Launch |
| US Dollar Reserve Fund | 2.0% | 1.6% | 1.1% |
Risk Grading
Low
High
Non-distributing
Important Information
The information on this website is available to Qualified Investors and Professionals in some jurisdictions on a limited private placement basis subject to applicable laws and regulations in the country of distribution. The information is confidential and should not be reproduced or distributed to persons other than the recipient.
The investment objective stated above is a summary of the main objectives of the Fund. Please refer to the BGF prospectus for full details.
A limited range of BGF sub-funds have a distributor status A share class that seeks to comply with UK Distributor Status requirements. Please contact the Manager for more information.
Performance
The Fund returned -0.01% over the month.
Rates remained unchanged in May however the minutes of the April Federal Open Market Committee (FOMC) meeting revealed a slightly more positive outlook. Although the Committee continued to reiterate its commitment to hold interest rates at historic lows for an “extended period”, it was noted that the job market is “beginning to improve” and that consumer spending has “picked up”. Concern over sovereign risk in certain peripheral countries within Europe contributed to an increase in financial market volatility in May. These conditions, along with continued asset outflows in money market funds, put upward pressure on LIBOR settings.
During the month, the US dollar strengthened versus the British pound. The currency hedge underlying this share class prevented returns in the hedged share class reflecting this trend.
Portfolio Activity
We have passively shortened the overall duration of the Fund, standing within a range of 32-48 days; an estimated 5-12 days shorter than the second half of 2009. Investments over the period were concentrated in the front-end of the curve at levels of LIBOR less eight to plus seven. Additional incremental extension trades were executed solely in government and agency securities. Adding to these asset classes allowed us to maintain duration, while continuing to diversify holdings and increasing the overall credit quality and liquidity of the portfolio.
Current Positioning
LIBOR and the rate at which banks lend to each other, as well as to the market, has been a prevailing theme so far this year; specifically in determining the investment landscape and design of the market. It is anticipated that LIBORs will remain under pressure in coming months
The liquidity profile of the Fund remains strong; at the beginning of June, an estimated 32% of assets mature within five business days.