Lazard Dumps the Dollar

Includes: UDN, UUP
by: Ray

In a surprise move, Lazard Asset Management’s “The World Trust Fund” has dumped the USD as its primary currency in favor of Sterling. Typically these funds trade in the USD, but the fund’s board apparently felt pressure from shareholders and investors to change its primary currency from the USD to the pound. One can imagine it is because the recent slide of the USD from 89 to 75 in recent months impacts the real return of the fund’s performance.

In the filing, the fund stated:

“In response to comments from a number of shareholders and potential investors in the Fund about the liquidity of the Fund’s shares, the Board, having consulted with the Fund’s brokers, Arbuthnot Securities, believes that having a larger number of shares in issue with a lower share price than at present and changing the currency in which the shares are traded from US dollars to Sterling, should assist in improving the marketability and liquidity of the Fund’s shares and support the attraction and retention of a diverse shareholder base.”

That is a stunning statement to read and is a possible sign of the times as the USD is under pressure from every direction and in jeopardy of losing its reserve currency status. Lazard Asset Management is a rather prestigious firm and such a drastic move is shocking to say the least. Will other asset managers follow suit? More than likely, but only time will tell. However, if they do, this will cause unneeded selling in the USD that could cause further declines given the large holdings of international mutual funds within the US.

This is something that I am keeping a close eye on, and I suggest you do the same. As I have stated before, much of your real return in the markets has been phantom because of the decline in the dollar, and the same can be said about international returns, as your assets are priced in the USD. If your international assets were priced in foreign currencies you would have had substantial returns this year, i.e. Brazil’s Real appreciated 32% against the USD, so if you invested in the BOVESPA in the Real you would have had an outstanding year. Of course, if the currency went the other way the opposite would be true, but given the fiscal impasse the US is under it is unlikely the USD will have any meaningful lang-term strength. Apparently Lazard feels the same way.

Read the story HERE