Protecting my pension against sterling crash

jamesd

bleaky wrote: »

The reason for holding non sterling cash is so that I can move my investment from one non-£ asset to another non-£ asset without having to change back to £. It would allow me to invest to avoid £ weakness without worrying too much about the time horizon of £ weakness, which could be lengthy in a worst case scenario. Or am I missing something ?

Mainly that the sale proceeds will probably be converted to Pounds and then Pounds used to buy the other fund. There are some trading-oriented SIPPs that will not do this but I've seen no sign of HL being one of them.

For fund transfers via Pounds it's daily volatility and exchange rate costs and fees that are the concern.

Debt_Free_Chick

Assuming you are buying overseas equity funds, the fund manager may hedge a certain amount of the fund's exposure, within the fund itself (I think I'd be surprised if they didn't).

Institutional investors - like pension schemes - have access to range of currency hedge funds, from pooled funds to more sophisticated "overlays".

Perhaps there's a pooled fund that provides for Sterling currency hedging? If there is, then the chances are it only hedges against the pound/dollar. Perhaps you'll find one for the pound/euro too .... but I doubt there are retail funds that will hedge against every currency you have exposure too - especially if you're investing in emerging markets.

Once you've found a fund (if there is one) you then need to calculate the appropriate amount to allocate to that fund. So if you have 25% of your equity investments in the US, how much do you need to move from the US equity fund to the Sterling currency hedging fund ......? This can be quite complex as you'll need to take account of any leveraging within the SCHF.

In short, SCHFs exist for the institutional investor - you'll need to do research to see if they exist for the private/retail investor. And then you'll need to more research or get advice to determine how to balance the asset allocation so that the SCHF gives you a hedge to a decent proportion of the currency exposure. Finally, its likely you can do this for USD only, so if you have no US equity exposure, forget it

p.s. I'm a pensions manager/secretary to trustee with SCHF in our equity portfolio.

Debt_Free_Chick

Brief article on Morningstar about currency hedging within o/seas equity funds.