GAM's Hepworth on why currency investing is no 'mug's game'

GAM's Hepworth on why currency investing is no 'mug's game'

What managers and economists think is important and what clients think is important can be vastly different, as advisers at a recent FTAdviser roadshow proved.

Discussing what may or may not be a safe haven asset, investment managers and consultants mentioned the strong performance of the US dollar in 2016, citing strong returns from the currency.

During a panel debate at the FTAdviser roadshow in Chepstow yesterday (22 March), investing in currency was questioned. "Is it a safe haven asset or is currency investing a mug's game?"

Article continues after advert

Opinion was divided. Charles Hepworth, investment director in GAM's global investment solutions team, said: "It wasn't a mug's game in 2016. We made unbelievable returns.

"Sure, over the long term, trying to do this all the time is very difficult but we cannot dismiss the effects on the portfolio of getting a currency play right.

"Moreover, despite Brexit and (US president Donald) Trump's still uncertain effect on financial markets, we are not too bearish on either sterling or the dollar."

Abbie Knight, founder of A Business Consultancy and discretionary investment information website Discus, agreed.

She said: "Discretionary managers I have spoken to said they did very well from currency in 2016."

Yet among the 54 financial advisers in the room at the roadshow, sponsored by GAM, when asked whether they or their clients were at all bothered about currency plays or the effect of currency on a portfolio, only one person raised his hand.

The other advisers said their clients were not concerned about currency and certainly would not consider it to be a safe haven asset or even a risk asset.

It was just something in which some funds are denominated as far as end clients are concerned, advisers said.

Two other panellists were sympathetic to this attitude.

Jeremy Smouha, chief executive of Atlanticomnium, said: "We focus on getting rid of risks out of our bond funds so we do not want to bring currency risk into play.

"You cannot accurately value a currency. Yes you can be successful but if you bought a currency and held it it would be exceptionally volatile."

Graham Bentley, fellow panellist and founder of investment consultancy GBI2, said: "If you consider what a currency is, it is basically an agreement with the government and the central bank that allows you to buy stuff.

"The chances of being able to predict currency movements accurately is beyond machines, let alone beyond human beings.

"In any case", he said, "It might not matter in a few years. We are already seeing the death of notes and coins. I do not think the point is far off in the future when we will have expiry dates on our £50 notes and we will have to take it into the bank to change it.

"Then the bank will say they can issue us a new one, but it will cost £21 in some digital currency. It sounds far fetched but similar things are already happening with gift cards."