Speaking to Portfolio Adviser on Tuesday, the day after it was announced that the debt talks had broken down, Justin Onuekwusi, fund manager within LGIM’s portfolio strategy team said: “We were wary that they would not reach a compromise to extend the debt. That has happened now and, that is really one of the last chances to do that.”
Onuekwusi added that in LGIM’s view the two sides will ultimately come to a compromise, but said the risk that they do not remains. As a result, the group has decided within its multi-index range to hedge half of the euro currency exposure back to dollars.
“Previously the European equities exposure was completely unhedged. We may look to do a little more as we get more detail about what happened in the meeting yesterday,” Onuekwusi said.
He added: “We hedged into US dollars because we think sterling could be affected by this as well while the dollar throughout all of this, should perform reasonably well against the euro.”
The group has also upped its exposure to UK property, taking its holding within the portfolios to just below the 10% limit it has for the asset class.
The reason for the increase, Onuekwusi said: “With both bonds and equities are looking pretty fully valued, property is one area where we do see potential to still see further growth in 2015.
“You are still seeing rents going up, secondary property is still showing yield compression, both of which are signs that the property market can still go further.”
The exposure is through the L&G UK Property Fund.
