A Fund for 'Black Swan' Investors

A theme of some of my recent articles has been finding products that help investors build a different kind of portfolio than the typical stocks/bonds/cash mix. Ten years of (very) substandard equity returns are leaving investors seeking out different approaches to portfolio construction.

One interesting view comes from Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable. He calls for putting 90% to 95% of your assets into T-bills from various countries and the remainder into very aggressive investments, with the idea being that only a small portion of anyone's portfolio should be exposed to risk.

One way to capitalize, sort of, on this concept is with the Barclays Asian and Gulf Currency Revaluation ETN(PGD Quote). PGD provides equal weighting to the Saudi riyal, UAE dirham, Hong Kong dollar, Singapore dollar and the Chinese yuan in the hope that one or more of those currencies will be allowed to float freely in the currency market. The Singaporean dollar and the yuan can move but are considered to be managed.

If none of the currencies are unpegged from the dollar, then the price of PGD should not move very much, and that has been the case with the range from high to low since inception only being 4.9%. The political pressure on China and the inflation pressure in Hong Kong and the Middle East create visibility but no certainty for revaluation. If there is no revaluation, PGD won't do much except pay out a T-bill-like yield on a monthly basis.

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