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Sarasin takes currency view on equity funds

Sarasin & Partners has introduced two funds that are based on its equisar global thematic and global equity income funds, but remove foreign currency risk by hedging investments back into sterling.

Sarasin equisar global thematic and Sarasin global equity income enable investors to invest in global equities without being affected by moves in currency rates. They were established in response to investors being attracted by the current value in global equity markets but concerned about the potential for appreciation in sterling. Sterling recently hit a seven-month high against the dollar and could strengthen further.

Both funds follow Sarasin’s thematic investment process and will aim to hedge 85 to 95 per cent of foreign currency exposure back into sterling. A full 100 per cent hedge may be possible at times but is unlikely to happen regularly due to money coming and going out of the fund and any changes the managers may make to the portfolio.

Unlike many global equity funds that invest according to region, these funds look for companies that are expected to benefit from five global trends that are driving profit growth and share prices, wherever they are based.

Corporate restructuring refers to companies where value will be created by internal reorganisation or external pressures. The strong get stronger refers to companies that are able to fund growth themselves to gain an advantage over rival companies, even in a weak economic environment.

Intellectual property and excellence looks at companies with superior intellectual property while pricing power identifies companies where a catalyst may lead to a re-rating and where the companies have a good profit margin. Security of supply identifies firms that provide goods or services that are necessities for other companies or regions.

Investing globally diversifies risk and enables Sarasin’s fund managers to choose from a wide universe of stocks and in the case of the income fund, it allows investors to benefit from the trend for more companies overseas to pay dividends.

Sarasin says there seem to be few global equity funds partially or fully hedge foreign currency risk into sterling. JPM global equity is one of the few that does but it does not take a thematic investment approach.

Currency hedging can have a negative impact on returns when the hedged currency depreciates, as the fund cannot benefit from appreciation in other currencies.

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