Industry commentators have warned the majority of independent financial advisers (IFAs) and wealth managers have failed to hedge their foreign currency holdings into sterling, meaning a rally in the pound could wipe out returns. In a further warning, they said unknowing investors in safe-haven assets such as global bond funds will be hardest hit by a sterling rally, as bonds are most affected by currency movements. In 2016,...
A sterling rally could hit Brexit investors' returns because most independent financial advisers and wealth managers have not hedged foreign currency holdings into sterling. Investors in foreign assets profited when sterling fell sharply after the UK vote in 2016. However, the opposite will happen after the Brexit leaves the EU, regardless of how, said Christopher Peel, the CIO of Tavistock Wealth. Peter Sleep, a senior investment manager at 7IM, explained that government and corporate bonds are systematically hedged but equities are not. Peel said the Financial Conduct Authority is aware of the risk but lacks the power to address it.