If you're a bond fund manager in the U.S. looking for returns, where do you go?

   For at least one manager, the answer is, across the border.

   Don Quigley, co-portfolio manager of the Julius Baer Total Return Bond Fund, said in an interview yesterday the uncertain bond market picture in the U.S. has him seeking more positions in non-dollar issues. He feels the most attractive opportunities lie in Iceland, Mexico and New Zealand. The fund deals only in investment grade bonds, so ventures into countries such as Brazil are off limits.

   Although the Julius Baer Total Return Bond Fund is focused primarily on the U.S.-its bond holdings are normally about 80% domestic-Quigley says there are compelling reasons to look international.

   Quigley says that while the U.S. economy is stable, it's unclear when the Fed may raise rates again, how much inflation may heat up and how the dollar will perform.

   In the short term, he expects the European Central Bank to tighten interest rates more than the Fed. Over the long term, he thinks the value of the dollar is in trouble because of U.S. budget deficits.

   Quigley feels it is likely the U.S. economy will slow and that a key variable will be the real estate market.

   What concerns Quigley is the impact a cooling of the real estate market could have on Florida, California and other coastal regions where speculative investments and property flipping were running rampant.

   "Housing to me could be a train wreck in slow motion," he says. "If (a slowdown or recession) is housing led, it's going to be a long protracted thing."