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L&G absolute return fund cuts sterling exposure

L&G absolute return fund cuts sterling exposure

The managers of the £575m Legal and General Multi Asset Target Return fund have cut their exposure to sterling, as they believe the dangers associated with a hard Brexit have receded.

Willem Klijnstra, one of the fund's joint managers, said in the immediate aftermath of he UK’s vote to exit the EU in 2016, the fund increased its investments in sterling because he felt the market may have misread the risks to the value of the currency, creating an investment opportunity.

But he said the extension of Article 50 had seen sterling rise in value, to the point where it was not, in his opinion, good value any more.

The fund now has the same exposure to sterling as does the market as a whole.

Mr Klijnstra added he was preparing the fund for a period where interest rates remained below long term averages for an extended period of time, meaning investments in bonds and infrastructure.

His comments come as the fund launches an income share class, which it said is in response to clients seeking income in retirement.

The fund has a target to achieve 5 per cent more than cash, over rolling three year periods. The fund yields about 3 per cent and the dividend will be paid quarterly.

Mr Klijnstra said a problem experienced by many absolute return funds was that as they grow in size, they are forced to invest in ever more esoteric assets and, with this in mind, he was conscious of his fund's capacity constraints, though he felt it could grow considerably above its current size before it becomes too big.

Tom Sparke, investment director at multi-asset fund house GDIM in Cambridge said:"This fund has been one of few in the absolute return space to fulfil the mandate successfully and I believe that an income element can add to the defensive nature of the fund.

"This also means that it can be used as an effective diversifier in many different types of portfolio."

david.thorpe@ft.com