Old Mutual Asset Managers head of fixed income Stewart Cowley has introduced dollar exposure into the £629m Old Mutual global strategic bond fund in anticipation of a flight to safety towards dollar assets.
He has brought in a 24 per cent US dollar exposure to the fund through forward foreign exchange contracts.
Fifty-two per cent of the fund is now in sterling, 10 per cent in commodity-related currencies such as the Australian and Canadian dollar, 9 per cent in Singapore dollars and Chinese renmimbi and the remaining 5 per cent in Japanese yen.
Cowley (pictured) says: “We have some US dollars in the fund for the first time since last year as clearly there is trouble coming in Europe. We can see tensions in Europe are rising over the expectation that Italy and Spain will require heavy funding during the course of the summer. There is the risk that these countries’ bond auctions will not go well.
“It is not that the US is without its problems, especially in the way it runs its finances, but, in the short term, a flight to safety towards the US dollar is more likely over the summer months.”
Whitechurch managing director Gavin Haynes says: “The US dollar is the world’s reserve currency, so trouble in Europe will encourage investors to move to dollar assets.”