The UK equity funds for a sterling reversal

Renewed dollar strength has led forecasters to predict a tougher time for sterling in the coming months, despite a small relief rally last week as Scotland opted against independence. Which funds could benefit?

Having hit a five-year high of $1.71 against the dollar in early July, sterling now stands 4% lower at just under $1.64. Despite the prospect of a UK rate rise in early 2015, some economists suggest a resurgent dollar and continued political risk ahead of the UK general election will weigh on the pound. The UK equity funds most vulnerable to a falling currency would be those with the highest exposure to small and mid-caps. Meanwhile, those funds with a high proportion of international holdings or holdings in FTSE 100 companies, which generate most of their earnings from outside th...