Rising Sterling - Global Portfolio

[MartynC27]

My current passive portfolio of ETFs has benefited from the fall in the pound over the year after the Brexit vote, however as the pound has been on a rising trend over the past few months this has had the opposite effect. This is my passive portfolio:-

USA ------------------ VUSA (36% of capital + ISP6 3% of capital)
UK -------------------- VUKE (10% of capital + VMID 2.5% of capital)
Europe -----------------VERX (21% of capital)
Asia Pacific ----------- VAPX (7.5% of capital)
Japan ------------------ VJPN (10% of capital)
Emerging Markets-----VFEM (10% of capital)

Have any readers made any changes to their regional allocations because of the possibility of a further rising pound ?
I have considered putting say 20% in sterling Hedged ETFs but these are expensive and is probably a bit late to switch into these now ? -- Any comments welcome
MartynC

[Spet0789]

I wouldn't worry about it too much for two reasons.

Firstly and in the short term, this pound strength is largely due to perceptions of increased likelihood of a rise in interest rates. To be honest I don't see this persisting. Given all of the current weakening of economic trends in the UK vs the rest of the world, I don't see this persisting.

Far more importantly, depending on your lifestyle your consumption is effectively a mix of global and national goods with their own prices pressures. Not an issue (in my opinion) if your investments are similarly diversified. Hedged share classes are a waste of money to me - just another layer of costs and under current banking regulations increasingly expensive to implement.

[dspp]

Have any readers made any changes to their regional allocations because of the possibility of a further rising pound ?
MartynC

For what it is worth I have not made any changes, and my non-HYP index portfolio has many similarities with yours. So that will of course make two of us who are wrong

regards, dspp

[hiriskpaul]

Currency risk comes with investing in equities, even UK listed equities. If you are uncomfortable with the level of risk, you could hedge some of the risk out, using spread bets for example, but all hedging carries a cost. An alternative approach might be to overweight GBP fixed income assets (or GBP hedged fixed income) at the expense of foreign currency denominated fixed income assets. That is what I do. On the whole though I like the currency risk - it has benefits as well as drawbacks.

[MartynC27]

An alternative approach might be to overweight GBP fixed income assets (or GBP hedged fixed income) at the expense of foreign currency denominated fixed income assets

I note that the GBP Gov Bond ETFs such as - VGov,,, GLTS,,, IGLT fell and also Corporate Bond etfs - IS15 ,,&,,SLXX also fell a bit with the BOE talk about a interest rate increase.

The Emeging Markets Bond ETF - UBS Emg Mrks Sov A ETF (SBEG) ( hedged to GBP) which I hold at the same time last week rose.

Martyn C