If fund managers are known for being more upbeat than cynical, why is Kevin Baum, portfolio manager of Oppenheimer Real Futures Fund, so downbeat about the greenback? In his view, the US dollar is not just weakening or readjusting, it is being debased in a style that has foreshadowed the ruin of many a great currency.
Ranked number 11 out of the top 100 mutual fund managers in the United States by Barron's, Mr Baum is not so much predicting the doom of the world's reserve currency as the rise of a new asset class that will provide strong returns for years to come.
He says commodity funds can act as an alternative currency, helping to hedge against dollar weakness. Investors, he says, should protect themselves by placing about 10 to 15 per cent of their portfolio in a commodity fund.
Mr Baum is the New York-based manager of Oppenheimer's new commodity futures fund, and was recently in Hong Kong to promote the SFC-registered product. The fund invests in a combination of futures contracts and fixed-income securities. It uses a long-only structure, betting on rising prices in both industrial and agricultural commodities.
Why is the dollar being debased? 'There has been a change in the behaviour of central banks,' he says. 'There has been a shift in behaviour where they keep one eye on inflation and another on economic growth, and try to manage policy with respect to growth.'
Such a conflict of roles could be responsible for the negative interest rates we have today, the first seen in about three decades. Count Japan and China among those willing to support the low-interest rate regime, and the result is an accommodative monetary policy that is swamping the globe.
Mr Baum says loosening the lending rate is a natural way to stimulate the economy in times of recession. But there is a danger when the policy incites copy-cat currency weakness at a time when the US has a record trade and fiscal deficit.
