The best and worst: International fixed-interest unit trusts

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BONDS may be popular with fund managers, but the specialist bond funds aimed at small investors carry risks.

Caroline Hay, investment manager of Guinness Flight's EMU fund and Global High Income fund, concedes: 'We have not been successful over the last year with our currency view.'

The EMU fund, a European bond fund, tends to be insulated automatically from currency problems because of sterling's membership of the exchange rate mechanism.

The managers do hedge within the Global bond fund, however, and moved out of sterling and European currencies because they thought these would depreciate against the yen and dollar. But both the deutschmark and pound have appreciated against the yen and dollar over the last 12 months.

Jeremy Alford, marketing manager at Whittingdale Unit Trust Management, specialists in fixed-interest investment, says the group's US Short Government bond fund is the only international fixed- interest fund to be denominated in dollars.

He said someone wanting a more general bond fund, with a spread of currency risk, would be pointed towards Whittingdale's Challenger unit trust, which can switch freely between equities and bonds. The fund ranks second out of 21 unit trusts in the international balanced sector over 12 months, showing a 4.39 per cent profit after the initial charges.

----------------------------------------------------------------- INTERNATIONAL FIXED-INTEREST UNIT TRUSTS ----------------------------------------------------------------- The best pounds 1 Guinness Flight EMU 104.82 2 Baring Global Bond 104.13 3 INVESCO International Bond 102.15 4 Britannia Life Global Bond 102.12 5 MGM International Bond 101.98 The worst 19 CU Worldwide Bond 94.42 20 Legal & General International Bond 94.03 21 Waverley Global Bond 92.12 22 Guinness Flight Global Hi Inc Bond 91.47 23 Whittingdale US Short Govt Bond 90.40 ----------------------------------------------------------------- with income reinvested Source: Micropal -----------------------------------------------------------------