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Merk Hard Currency Fund: Frequently Asked Questions

Find more answers in the Shareholder FAQ.


What are the objectives of the Merk Hard Currency Fund?

The Merk Hard Currency Fund is a mutual fund that invests in a basket of hard currencies from countries with sound monetary policies assembled to protect against a decline in the dollar while seeking to mitigate stock market, credit and interest risks.

Investments in hard currencies seek to protect against a fall in the purchasing power of the dollar and mitigate stock market, credit and interest rate risk.

How much of my portfolio should be in Hard Currencies?

A classic asset allocation model assumes world financial markets in balance. When the global financial imbalances are severe, asset classes may not perform as historically anticipated. In these times, investors may want to consider moving some of their investments to hard currency.

Investment in hard currency seek to protect against a fall in the purchasing power of the dollar and mitigates stock market, credit and interest rate risk.

How does the Merk Hard Currency Fund help diversify my portfolio?

Diversification is the practice of reducing investment risk by spreading assets over several categories of investments. The Merk Hard Currency Fund helps you to diversify your portfolio and protect your capital against a decline in the dollar by providing easy access, through the fund, to hard currencies from countries with sound monetary policies.

What are the criteria employed in determining the composition of the Merk Hard Currency Fund?

Under normal market conditions, the Merk Hard Currency Fund invests at least 80% of the value of its net assets in hard currencies. The Fund normally invests in a basket of foreign currencies composed of high-quality, short-term money market instruments of countries pursuing “sound” monetary policy, and indirectly in gold. Currency allocations may be adapted as monetary policies and economic environments evolve.

Does the Merk Hard Currency Fund engage in tactical trading?

The Merk Funds publish their currency allocations monthly; this allocation adapts as our analyses evolves. We use the term "adapt" and "evolve" to emphasize that allocation changes tend to be gradual. Tactical trading refers to short-term trading to take advantage of perceived opportunities. While the Fund is not prevented from engaging in tactical trading, tactical trading is not part of the Fund's investment process.

Is gold a hard currency?

Gold is the only currency with intrinsic value and as such qualifies as a hard currency. Gold has a track record measured in millenia. In contrast, the current U.S. dollar experiment only dates back to 1971, when Nixon de-linked the U.S. dollar from gold and converted it fully to a modern fiat currency, solely backed by the "faith" of the U.S. government. Central banks have the power to "inflate" in their attempt to spur economic growth. Murray Rothbard, who was the dean of the Austrian School of Economic and Academic Vice President of the Ludwig von Mises Institute, alleges that central banks, rather than smoothing economic cycles, make economic cycles more extreme. Amongst others, Rothbard shows that the Great Depression would have been shorter and less severe had there not been government intervention through ill-conceived monetary and government policies. *



* Rothbard, Murray, 2000, America's Great Depression, 5th edition (first edition 1963), Mises Institute