I read an interesting article in the recent issue of Money magazine.  The basic premise was that foreign stock and bond funds were an excellent hedge against a collapsing US$. 

The article mentioned putting 20% of one's total bond holdings in an international bond portfolio (it also advised jumping in slowly since these funds have done relatively well lately).  It mentioned RPIBX as a good choice because it usually doesn't use currency maneuvers to hedge exchange rates gains/losses and these movements are needed when the goal is to hedge the US$.

I'm intrigued by this strategy (and my overall allocation is light on bonds) and wanted to know if anyone could offer some additional insight on this fund.  Also, I'm assuming bond funds are better in a Roth vs a traditional IRA due to the income generated.  Any thoughts?

I've owned RPSIX off and on for a long time. Currently their portfolio shows about 14% in RPIBX. I also own some foreign bonds in a number of closed-end funds.

Top 25 Holdings		Maturity Date	Amount 000	Value $000	% Net Assets
	T. Rowe Price New Income	---	126,371	1,153,769	21.93
	T. Rowe Price High-Yield	---	135,173	858,350	16.32
	T. Rowe Price Equity Income	---	32,301	806,882	15.34
	T. Rowe Price International Bond	---	68,052	737,008	14.01
	T. Rowe Price GNMA	---	70,199	670,396	12.74
	T. Rowe Price Limited-Term Bond	---	94,368	449,193	8.54
	T. Rowe Price U.S. Treasury Long-Term	---	23,360	289,194	5.50
	T. Rowe Price Emerging Markets Bond	---	11,972	155,876	2.96
	T. Rowe Price Corporate Income	---	10,931	101,661	1.93

I use and like RPIBX a lot--be aware, though, that it jumps around a lot: price changes of .5-1.0 % aren't uncommon.  Like the above writer, I use RPSIX as well and keep it about three times as large as Int'l Bond.  It's a lot more stable.  To me, it doesn't make much difference which IRA vehicle you keep them in--if anything, I prefer stock funds in Roths, since (in theory) the larger long-term gains over bonds will be tax-free. If you're light on bonds, one tactic I've had luck with is to skim the "winnings" when a fund has a good period and goes over your allocated level.  That both builds your bond share and keeps you from getting too greedy with the winners.  MarkB. 

I like using RPIBX as a supporting position along with more core type holdings like PRCIX and PRIPX. PRCIX can hold TIPS, but rarely does so in any meaningful percentage.

I see RPSIX as a stand alone bond fund. I will most likely use it as a core fund in retirement. (After I've reduced my equity exposure) The only thing that bothers me about it is the 15+or-allocation to PRFDX. At this point of the game I like my bonds to have a low correlation to stocks. Case in point, today was a pretty rough day for stocks. PRIPX was up .26% and PRCIX up .22% while RPSIX was down .25%. My core funds offered me what I want in bonds -protection in a down market and a zig when stocks zag.

RPIBX is a terrific fund. It has the potential to serve as a nice diversifier and a nice complement to core bond funds. Just keep a couple of things in mind:

1. If you don't already own it you may be disappointed buying in now as it has burned blue flame hot recently and can't keep up that pace forever. (It has already started to cool off)

2. What currencies/interest rates will do going forward is one of the most confounding things to even attempt to predict-at least as difficult as figuring out what stocks will do, and perhaps even more so.

migues

 

Thanks to all for your comments.  I appreciate the insight.

I'm very comforable with my "core" portfolio and intended to use this as an "explore" option.  This would complement my existing 401k holdings in PTTRX (Pimco Total Return) and FBIDX (Fido US Bond). 

I would definitely start small and DCA in given the recent performance.  Just need to evaluate whether this type of fund would be better in a traditional or Roth IRA or if it matters.