Mutual funds look beyond chaos in Iraq

Wall Street Journal via Post Gazette ^ | March 17, 2006 | Jennifer Levitz

[do the dhue]

March 17, 2006 By Jennifer Levitz, The Wall Street Journal Considering the strife bordering on civil war, this may not seem like the best time for mutual funds to put money into Iraq. But some are doing just that. Looking for high yields -- and confident that oil reserves will be there to repay the debt -- mutual funds are among the investors quietly buying small chunks of about $2.8 billion in bonds issued by the Iraqi government in January as part of its restructuring of debts left by Saddam Hussein. T. Rowe Price Group Inc., based in Baltimore, says about $16 million of its $558 million Emerging Market Bond Fund is invested in the new Iraqi bonds. Standish Mellon Asset Management Co., of Boston, says it has about $2 million in Iraqi bonds, spread out among some of its emerging-market mutual funds. It declined to identify the funds but said they had a total of $400 million in assets. ING Group and Merrill Lynch & Co. recently showed up on a brokers-only computer network as bidders for the Iraqi bonds, one person with access to the system says. It couldn't be learned whether the firms were interested as buyers for their own accounts or for customers. Merrill and ING said they couldn't comment on interest in Iraq. Don Phillips, managing director of Morningstar, says. "If there are pockets of yield, fund managers are going to be attracted." The new Iraqi bonds, which haven't been rated by any of the major credit-rating companies, are due in 2028 and were issued with a 5.8 percent interest rate. After the recent Sunni-Shiite violence, the market value of the bonds has dropped to just above 68 cents on the dollar, which turns into a yield of 9.5 percent.

[do the dhue]

Why are Mutual Funds buying Iraqi Bonds, if Iraq is going to hell in a hand basket?

Dr. Robert Schuler said 'tough times last last but tough people do'. I was a part of the majority who supported this war before it began. I will not waver, falter, or fail. Through tough times or good times, I will support this war and my troops. I thank them for doing the best job they can do and for coming home safe. I want to thank the families who have given the ultimate gift to freedom.

Presently, since the 'civil strife', less of our troops have had to give their life for freedom. Maybe, we need to let these two siblings fight it out before they will will sit down and talk. We can tell them that the winner gets to take us on. I don't know for sure, but I do know that I support this war and will until its bloody end.

[do the dhue]

yough times NEVER last but tough people do

[Billthedrill]

9.5% isn't a bad yield if you can tolerate the risk. I'll certainly look into it. Thanks for posting.

[do the dhue]

Tough times never last but tough people do.

THERE!

I also have a problem typing Demorat. No matter how hard I try, I can not get myself to put the 'c' in Demorat.

Demorat
Demorat
Demorat

I just can't type it right.

[do the dhue]

I don't have any Mutual Funds with Iraqi Bonds but I did purchase 1.75 million Iraqi dinars at Compass bank here in Texas. Compass stopped selling them at the recommendation of the board and auditors on March 1, 2006. I can't find a US bank dealing them now. I see web sites selling dinars, but I don't if I trust all that.

[BTCM]

Bond fund purchasers are at the mercy of the managers. Having purchased a couple of bond funds paying a hellacious dividend during the bad old Jimmah Koter days, I later saw the fund managers sell the bonds for capital gains in order to pump up their bonus and replace them with more expensive lower yielding bonds. Honest fund managers are as scarce as hen's teeth. A few years back the average fund investor lost $4000.00 and the average fund manager made $40,000.00.

[do the dhue]

So, why do you think they are buying Iraqi bonds?

[JasonC]

You can get a yield that high on Ford paper.

[Billthedrill]

Yeah - and for the same reason. :-)

[do the dhue]

You mean if the US started selling 'Iraqi' or 'War on Terror' War Bonds? I don't know if they could do that or not. It might be a good idea if they can set back Iraqi oil rather than tax payer money to back it.

[JasonC]

If you want a nice hedge, you can short GM common at the same time (lol).

[Recovering_Democrat]

America will win if we can keep the liberals--most of them Democrats--out of the seats of power. Otherwise, we will suffer terrible setbacks: in the War on Terror and economically.