Euro Out, Ruble In: A Swiss Asset Manager Reveals Top Strategies for Hedging the Dollar
By Rich Checkan
Rob Vrijhof, Founder and President of Weber Hartman Vrijhof & Partners Ltd. (WHVP), an independent financial services firm in Zurich, Switzerland, reveals his step-by-step plan to protect your assets from a falling dollar. Rob feels it's time to diversify with strengthening foreign currencies. But how? Read on for Rob’s revelations.
Rich: Let’s start with a better understanding of where the U.S. dollar is today against other currencies.
Rob: I understand the euphoria around the dollar’s present strength. But, let’s not forget that currencies, like any other asset, have cycles. The best plan is to take advantage of today's strong dollar and diversify into assets that are denominated outside the dollar. However, merely buying an ETF or even currencies themselves is really not enough. We also look for assets poised for gains or long-term income. Our approach is to meld good asset choices with good currency choices.
Rich: How do you select currencies for your clients’ portfolios?
Rob: Let's be clear - we do not manage currencies or trade futures. We select portfolios with securities denominated in foreign currencies. However, we go about the selection in a currency-focused fashion. We concentrate on the commodity currencies like those of Canada, New Zealand, Australia and Russia, or wherever a positive commodities market, such as oil rich countries, would result in strengthening the currency. Once we have identified these currencies, we look for the best investment in stocks and bonds inside those currencies. But, we would never invest unless the investment itself also has potential.
Rich: Do you see silver and gold as currency?
Rob: We do indeed. Right now, we have as much as 20-30% in gold and silver bullion. So long as gold holds firm around $1,220 per ounce, we are bullish. We view platinum and palladium as favorable choices as well, as they are industrial metals.
Rich: Explain the step-by-step way you select assets.
Rob: Here is a good example of how we work… In 2015, we noticed sanctions against Russia affected the ruble. In the second quarter, the ruble was at 50-55 to the dollar. Eventually, it weakened and went up to 83 rubles to the dollar. We knew we were going to enter this currency if it went down into the 70s per dollar. We looked at the economy and the stability of Russia and felt the ruble had staying power.
Our next step was to investigate the right investment pick. We looked at a Russian oil stock, which we rejected after speaking directly to analysts who we work with on a regular basis. We then spoke to foreign bankers who are a unique resource for us. We decided on a ruble-denominated bond which paid 11% yearly, which we bought at a premium. That bond is paying 5.5% every 6 months and is appreciating against the dollar as the ruble strengthens.
Rich: Are your portfolios affected by negative interest rates in Switzerland?
Rob: There is no issue here as our clients’ funds are invested. They typically hold only small cash balances with us. The negative interest rates only affect accounts with an enormous amount of cash.
Rich: What are the mechanics of opening an account with WHVP?
Rob: You can open an individual, joint, trust, family limited partnership and other accounts, all of which are separately managed and fashioned exclusively to your needs. There is never any commingling or breach of information among clients. You can rely on dealing with the same person for years. We can also open an IRA at a custodial bank in Switzerland or Austria. As with most money managers, we charge a fee, billed quarterly based on the amount under management. Most of our clients grant us a limited power of attorney so that we can trade for them.
Rich: What is the benefit of working with an independent offshore manager?
Rob: A foreign advisor gives greater diversification and has access to investments that may evade U.S. firms. We are SEC registered, so you have all the U.S. protections as well. However, because foreign bank custodians are costly, we are forced to accept only $500,000 as our minimum under management. So, we encourage families to open trusts, joint accounts and family limited partnerships to commit $500,000 per family. We are in discussion with banks so we can accept smaller accounts, and we currently offer Swiss variable annuities with minimums at $100,000.
Rich: Where can we find more information about your decisions and philosophy?
Rob: Actually, it is easy to keep up with our picks and philosophy. We offer a quarterly newsletter, The Swiss View, as well as Weekly Wisdom's, which we post on Facebook. We are happy to provide our newsletter to ASI readers free of charge, just email us at info@WHVP.ch.
For those interested in learning more about WHVP, call an ASI Preferred Client Relations representative at 800-831-0007 or send us an email. Should you decide to take this important step to diversify across currencies, we will act as a facilitator and liaison to Rob and help you along the way. As part of the process, ASI provides the currency conversion and transfer. Our preferred rates and experience help you Keep What’s Yours as you diversify internationally!