Aberdeen’s head of manager research has cited the US dollar’s safe-haven status as a reason to stand by M&G’s Global Macro Bond product and other funds hit by a bout of weakness in the currency.
Simon Wood, who works on the fund firm’s Multi-Manager range, said the M&G portfolio – managed by retail fixed interest head Jim Leaviss and Claudia Calich – had suffered recently due to dollar weakness.
“It has been a little painful recently because of the dollar exposure,” he said.
Perceptions of overvaluation have hurt the currency this year, with it losing 4 per cent against sterling on a year-to-date basis.
The Aberdeen team’s position in the dollar share class of the New Capital Wealthy Nations Bond fund, which invests in both sovereign and corporate debt, has also been hit.
But Mr Wood said a belief in the dollar’s safe-haven status, as well as actions taken in the M&G portfolio to mitigate currency weakness as a headwind, had helped him maintain conviction in these funds.
“With the New Capital fund we thought the dollar share class [was best] because we thought it would be the stronger currency,” he said. “It has hurt a bit [recently], but we think if it comes to a crisis, the dollar will be the reserve currency.”
Mr Wood added: “[Mr Leaviss] has been trimming dollar exposure [on the M&G fund]. He’s taking action himself – because we are not doing anything, it doesn’t mean the underlying managers aren’t doing anything.
“There’s action going on and we don’t want to compound that.”
Both funds are longstanding positions for the multi-manager team, which has sought bond portfolios with a different approaches.
Mr Wood said the team also favoured fixed income funds with a flexible approach, including Jupiter’s Strategic Bond product run by Ariel Bezalel.
However, Aberdeen’s team, like many, remains underweight bonds, with a preference for equities. As part of this focus, the team has been taking profits in the US and Japan while increasing exposure to European equities.
Mr Wood and his colleagues reduced exposure to the Pictet Japanese Equity Opportunities fund as a result.
He said: “We had the sterling hedged share class – it hurt us last year but has benefited us now. It’s just us trimming it back a little.”
Similarly, a 9.8 per cent weighting in Findlay Park American was taken down in favour of the Henderson European Focus fund and BlackRock manager Alister Hibbert’s European Dynamic vehicle.
“The Trump bump is slowing down quite a bit. We think there are better opportunities in Europe at the moment,” Mr Wood said.
The £186m Aberdeen Multi-Manager Cautious Managed Portfolio has returned 21 per cent over three years, versus a IA Mixed Investments 20-60% Shares sector average of 20 per cent, data from FE Analytics showed.