Currency returns are outperforming equities, so how can newbies get a slice of the action? UK overseas investors have been doing remarkably well out of Brexit. That’s the findings of Natixis Global Asset Management’s annual Global Portfolio Barometer, which has found that UK portfolios with significant non-sterling assets saw average performance of more than 13 per cent. That far outstripped even US investors, who came second globally with average returns of 8. Interestingly, though, a large part of that success was as a result of currency risk, with currency-related returns outperforming the underlying equity markets.
A substantial part of the explanation is currency risk which is no surprise since currency moves in 2016 were the highest since 2008 and had a large impact on the surveyed portfolios. 19 per cent return in 2016 due to the depreciation of the Pound versus the Dollar. For eurozone equities, this would have been around 16 per cent, and for Japanese equities this would have been 23 per cent. Currency impact was also seen in allocation funds, EM debt and high yield debt funds, which are often not hedged by advisers. In equities, these currency-related returns were more than the returns of the underlying equity markets.