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SOGEN FUNDS'
JEAN-MARIE EVEILLARD ET AL.
(continued from preceding
page)
fixed-income securities including some Brady Bonds, some high-yield U.S. corporates, and a few medium-term bonds - governments mostly denominated in Canadian and New Zealand dollars - plus a few 4 or 5-year U.S. treasuries.
OID: Besides those, do you own anything else which might fit in the hedge category loosely defined - natural resource-type things, etc.?
Eveillard: Not really. We own a smattering of commodity-related securities based on industrial and agricultural-related commodities throughout the world. For instance, we own Carter Holt in New Zealand which is a forest products and paper company.
OID: Which, as I recall, we've spoken about before.
Eveillard: Yes. But I don't look at it as a hedge.
OID: Because the security price might fluctuate more with financial markets than commodity prices?
Eveillard: That's right. Plus, I think there's a cyclical case to be made for commodities, in that, perhaps, in 1997, European and Japanese economies will be growing and, therefore, the world economy will be in gear.
Plus, there is the secular or quasi-secular case associated with the tremendous demand from the developing world. Mainland China, for example, has already turned from an exporter of oil to an importer. And as the standard of living in developing countries rises, the first desire won't be for services (such as a fancy haircut), but rather for goods you and I take for granted such as a bar of chocolate or a bicycle with gears.
OID: The pause that refreshes, if you will.
Eveillard: Exactly. And those goods will require
commodity inputs.
OID: As Robertson Stephens Paul Stephens and Templeton Funds' Mark Holowesko point out.
Eveillard: Yes. So, on that basis, we own a few commodity-related securities around the world. But I don't view them so much as hedges. I view them more as beneficiaries of any cyclical demand that might start in '97 or '98 if Europe and Japan get their act together plus demand over the next few years from developing countries.
OID: Is your posture today more defensive than usual - because, frankly, it looks similar to what it's been for the last decade or more....
Eveillard: I'm afraid it is.
OID: You're afraid?
Eveillard: Because it's been a mistake.
Page 3 of 20
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