Wealth managers consider removing sterling hedges

Yen and euro stronger

Wealth managers are debating scrapping the sterling hedges on their European equity portfolios, as the last six months have seen the euro strengthening around 9% against the pound with further room to run.

At its lowest point in July 2015, the euro was trading at €1.44 per pound, compared to €1.27 last week. Sterling has fallen as concerns grow about headwinds for the UK economy, including the upcoming EU referendum, while expectations for interest rate rises have been pushed back as far as Q3 2019, according to Capital Economics. In contrast, the euro has been strengthening, despite European Central Bank (ECB) president Mario Draghi (pictured) hinting at further monetary stimulus as early as next month. This divergence has impacted returns, with data compiled for Investment Week by ...