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Advisers urged into hedged classes amid currency chaos

Advisers urged into hedged classes amid currency chaos

Advisers are rapidly ramping up efforts to speak with clients about using hedged share classes as currency volatility spikes, according to JPMorgan Asset Management.

The collapse of the Swiss franc after the country unexpectedly removed restrictions on its currency is merely the latest example of volatility, head of UK sales Mike Parsons told FTAdviser, citing the euro’s tumble to a nine-year low against the dollar.

Mr Parsons said the European single currency may even fall further if the European Central Bank announces quantatative easing next week. He added that all of this is heightening urgency on investors to hedge their exposure.

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“European equities are quite attractive these days, but most advisers and wealth managers don’t want to own the currency, so the most sensible solution is to use hedged share classes.

“The problem has been that there are only a handful of such funds available and fund groups have not marketed very well those that are, while currency views have only recently become more clearly formed.”

Advisers are starting to move quickly to shift clients into funds that mitigate currency risk, particularly important for European equity exposure, where sterling’s strength relative to the euro has “significant” return implications, according to Mr Parsons.

He explained that blown QE is widely expected to be supportive for European equities, with the weaker currency actually helping to bolster exporters and further strengthening corporate balance sheets.

Mr Parsons used the current currency issues to promote the JPMorgan Europe Dynamic ex-UK fund, which he said was the firm’s second or third best-selling fund last year and has a strong pipeline going into 2015.

Jonathan Ingram, portfolio manager and head of the dynamic team, added that he is broadly bullish on the improving balance sheet strength of corporate Europe and thinks valuations are supportive.

peter.walker@ft.com