During this unpredictable time for the pound, James Calder research director at City Asset Management, argues a sterling hedge can be a useful.
“There is a school of thought that says if you are a sterling based investor you should be hedged all the time, but then you run the risk of being whipsawed,” he said.
But, he added, because of the volatility, unless you have a very strong view on a currency hedging can make sense.
“In terms of sterling, it should probably strengthen from here in the long term but that doesn’t mean it couldn’t go lower in the short term,” he said, explaining that City doesn’t allocate to currencies directly as an asset class, but does currently have a euro and yen hedge in place.
Adams has also been playing around with hedges but he doesn’t intend on taking any drastic steps until there is more clarity around the terms of the Brexit negotiation.
“We were overweight overseas currency and underweight sterling, but as of last week, we have neutralised that somewhat,” Adams stated.
“We moved one vehicle from unhedged into hedged not because we expect sterling to suddenly start rallying, but because we think the risk/rewards have played out there.”
Philbin, on the other hand, has been reducing his exposure to the UK market over the last six months for a variety of reasons, including increased volatility and Brexit’s impact on growth and sterling earnings.
“We have also reduced our UK exposure because we want better income streams and to diversify risks,” he said. “Correlations are rising and risks are rising too so we are becoming more defensive in our portfolio construction across the board in higher and lower equity weighting funds
