Weak pound helps overseas investment returns

Weak pound helps overseas investment returns

The post referendum landscape has been characterised by volatility across global markets – but these developments have created a surprise Brexit boom, say Cheshire wealth specialists Equilibrium Asset Management.

The depreciating pound, while cutting the spending power of Brits holidaying on the continent, has benefitted sterling investors in overseas funds who have seen their returns rocket.

This has led Colin Lawson, founder and partner Equilibrium Asset Management, to claim that bad news has been good news for markets – at least in the short term.

Speaking after addressing a 200-strong audience at Equilibrium’s client quarterly briefing Colin said: “I’m an unashamed optimist and while there is good reason for caution in the current investment climate, there is no doubt in the case of overseas markets we have seen something of a short-term Brexit boost.

“This has meant that sterling investors who have put their money into overseas funds have seen their returns amplified greatly by the depreciation of sterling post Brexit.

“The value of the pound against the dollar has fallen around 11 per cent – investors will have received a boost from the fact their fund has grown and also because the dollars they used to buy into the fund have increased in strength against the pound.

“In Japan where the Nikkei 225 is up 2.45 per cent since the 23rd of June, a sterling investment has provided returns of 18.63 per cent – so it’s clear a falling pound has created some interesting opportunities for investors, especially in a climate where returns on cash ISAs and savings accounts are low.

“With UK interest rates projected to remain at no higher than 0.5 per cent until 2020 there is also a possibility the currency effect we are currently seeing could be amplified further if US interest rates rise, making a further dent in the value of sterling. The big challenge for investors will be deciding the best time to exit those markets.”