Nuveen investments, an extremely larger manager of fixed income funds has three separate closed end funds which offer an opportunity to speculate on foreign currencies. All three funds are traded on the New York Stock Exchange. They have not done well and trade at discounts from net asset value, These funds are: Global Income & Currency Fund (GCF), Nuveen Global Government enhanced Income Fund (JGG) and Nuveen Multi-Currency Short term Government Income Fund (JGT).
Performance based on their chosen bench marks has been as follows:
| 1 Year | 5 Year | Since Inception | |
| GCF | (4.69%) | 1.24% | 1.99% |
| 3 Month Libor | 0.31% | 2.00% | 1.99% |
| JGG | 2.82% | 4.19% | 4.82% |
| Citigroup Currency Hedged World Government Bond Index | 5.49% | 4.52% | 5.26% |
| JGT | (2.39%) | n/a | 2.77% |
| Citigroup Non-U.S. World Government Bond Index | 2.22% | n/a | 6.02% |
Obviously, performance is anything but flattering. This is a very poor showing. I am surprised that management does not apologize or at least give excuses for the poor performance.
Management has embarked on a managed distribution program to pacify investors by paying out more money than they earn. For the calendar year ending December 31, 2011, the distribution rate based on net asset value, was as follows:
| GCF | 6.21% |
| JGG | 8.41% |
| JGT | 9.28% |
GLOBAL INCOME & CURRENCY FUND
As of December 31, 2011, GCF had net assets of $76,845,786 and does not use leverage. It had net investment income of 1.37% and net operating expenses of 1.21%. It sold at a 10.74% discount from net asset value.
Credit quality allocation was as follows:
| AAA | 58.2% |
| A | 23.7% |
| BBB | 05.8% |
| BB OR LOWER | 12.3% |
Major country allocations were as follows:
| United States | 53.7% |
| South Africa | 13.0% |
| Turkey | 12.2% |
| Poland | 10.7% |
| Mexico | 05.8% |
| Australia | 04.6% |
NUVEEN GLOBAL GOVERNMENT ENHANCED INCOME FUND
As of December 31, 2011, JGG had net assets of $144,701.499 and does not use leverage. It had net investment income of 1.10% and net operating expenses of 1.06%. It sold at an 8.41% discount from net asset value.
Credit quality allocation was as follows:
| AAA | 75.4% |
| AA | 09.3% |
| A | 10.5% |
| BB | 04.8 |
| United States | 41.9% |
| Germany | 18.7% |
| Czech Republic | 08.0% |
| Australia | 05.6% |
| South Africa | 05.3% |
| South Korea | 04.1% |
NUVEEN MULTI-CURRENCY SHORT-TERM GOVERNMENT INCOME FUND
As of December 31, 2011, JGT had net assets of $605,962,381 and does not use leverage. It had net investment income of 0.77% and net operating expenses of 1.06%. It sold at a 10.34% discount from net asset value.
Credit quality allocation was as follows:
| AAA | 57.4% |
| AA | 07.3% |
| A | 05.2% |
| BBB | 28.7% |
| BB OR LOWER | 01.4% |
Major country allocations were as follows:
| United States | 55.8% |
| Brazil | 23.2% |
| Chile | 06.9% |
| Columbia | 03.0% |
| Poland | 02.8% |
| Mexico | 02.5% |
CONCLUSION
All the funds have entered into numerous foreign currency exchange contracts as well as interest rate swaps. I have tried, but I cannot tell you what their actual foreign currency positions are or for that matter what their actual debt positions are. Even with "plain vanilla" domestic bonds, the use of derivatives makes it impossible for someone like me to know their actual positions.
There are many reasons not to buy these funds, with special emphasis on poor performance. I have bought a few shares, because I think that foreign currency allocation is the way to go. If Nuveen gets its act together, they could be good investments. I am not sure how to do it, but I think all investors should have exposure to foreign currencies. Particular emphasis should be given to currencies of developing nations which have strong and growing economies.
