Neil Woodford reckons investors should not worry about “overvalued” sterling’s fall following the Brexit vote.
In an interview with Hargreaves Lansdown, the fund manager also predicted the UK is unlikely to see a rate rise for three years and it is possible the US will not see a hike this year or next.
He says the US Federal Reserve raised rates last December “unnecessarily”.
Regarding sterling volatility following Brexit, Woodford says: “I don’t believe investors should be overly concerned about the fall in sterling.”
Sterling currently sits at $1.22, having fallen from $1.49 the day before the referendum results were known.
‘Although the outcome of the referendum is seen as the catalyst for sterling’s weakness, in my view the fall was inevitable.
“The pound has looked overvalued for years when you consider the many imbalances that we’ve seen building up in the economy for a very long time now.”
However, Woodford warned: “If the currency were to weaken significantly further, that would be a worrying sign that the situation is worsening towards a crisis of confidence in the UK more broadly.”
He says this is not what he expects to happen although he warns it is “not beyond the realms of possibility” and would also represent a buying opportunity.
While Woodford says the fund was positioned for sterling weakness and has benefited from it, he is considering at what level to start to hedge the portfolio’s US dollar exposure.
It would be the first time he has hedged US dollar exposure since Lehman’s went bankrupt in 2008.