Investments in currency other than Sterling? eg Euros

Rixdorf

I am looking to make some investments but I am not confident about Sterling and feel it will move towards parity with the euro in the near future and I spend a lot of time in Europe/abroad and may move to Europe eventually. I could hedge the exchange rate and I have to an extent as some of my funds are in Euros, but there is no Euros account with any interest. I know I could also invest in European or world markets and avoid the UK - but I wonder if there is some kind of investment, based in the UK where I can have it denominated in Euros or a non Sterling currency. Or is there another way to do this just because if the £ depreciates 10% vs Euro then this wipes off the profits of the investment. 
*Of course it could go the other way and the £ could get stronger too. I realise that.
Cheers

Sailtheworld

If you think Sterling will reach parity then what's the problem with not getting interest on a Euro account? You'll be 'up' by 10%.

EdGasketTheSecond

Maybe a euro bond or corporate bond fund. The corporate bonds will earn more interest than gov't bonds but with the higher risk of default by some of the companies whose bonds are held in the fund.

e.g. there are 4 EUR denominated funds in this list from iShares:

https://www.ishares.com/uk/professional/en/products/etf-investments#!type=all&fc=43770|43561|43562|43577|43578|43592|43607|43612|43618|43621|43629|43631&fac=43515&view=keyFacts

Please note your capital can go down with these types of funds though the risk must be small at the moment as no-one is thinking of raising interest rates in the near future.

DireEmblem

It really depends on the type of investment you want to make.  If a Bond fund, then generally they will hedge their capital to the currency of the share class you subscribe to.

For an equity fund, you really need to be willing to commit to at least 5-10 years, and if you go for an unhedged fund/class, as most generally are, then it doesn’t matter what your starting currency is.

You invest £100 in a Global equity fund, and the pound bombs in terms of its global buying power by 100%, then your holding excluding any other market activity would increase in value from £100 to £200, but it’s global buying power, and thus the amount of EUR/USD or whatever you wanted to exchange it to, would remain roughly the same if nothing else moved.

Rixdorf

Sailtheworld said:

If you think Sterling will reach parity then what's the problem with not getting interest on a Euro account? You'll be 'up' by 10%.

well sure! But I might also be wrong and it might take several years even if I am right. I am earning some of my money in euros, so I was just wondering if I could keep it in euros.

Rixdorf

EdGasketTheSecond said:

Maybe a euro bond or corporate bond fund. The corporate bonds will earn more interest than gov't bonds but with the higher risk of default by some of the companies whose bonds are held in the fund.

e.g. there are 4 EUR denominated funds in this list from iShares:

https://www.ishares.com/uk/professional/en/products/etf-investments#!type=all&fc=43770|43561|43562|43577|43578|43592|43607|43612|43618|43621|43629|43631&fac=43515&view=keyFacts

Please note your capital can go down with these types of funds though the risk must be small at the moment as no-one is thinking of raising interest rates in the near future.

Thanks. Will take a look.

Rixdorf

For an equity fund, you really need to be willing to commit to at least 5-10 years, and if you go for an unhedged fund/class, as most generally are, then it doesn’t matter what your starting currency is.

You invest £100 in a Global equity fund, and the pound bombs in terms of its global buying power by 100%, then your holding excluding any other market activity would increase in value from £100 to £200, but it’s global buying power, and thus the amount of EUR/USD or whatever you wanted to exchange it to, would remain roughly the same if nothing else moved.

Ok I never really thought about it like this. I read around and understand more about hedging etc, though I think I am still pretty clueless. Thanks for your time and post.

Sailtheworld

Rixdorf said:

Sailtheworld said:

If you think Sterling will reach parity then what's the problem with not getting interest on a Euro account? You'll be 'up' by 10%.

well sure! But I might also be wrong and it might take several years even if I am right. I am earning some of my money in euros, so I was just wondering if I could keep it in euros.

Effectively despite your feelings you're saying you don't have the foggiest what the future £/€ exchange rate will be? That's a good place to be because neither does anyone else.

It makes the answer easier. You diversify so you're not over-exposed to any currency - this can be informed by asking yourself a few 'what if' questions i.e. if £;€ is 1:1 how badly (or otherwise) does that affect you and what if it goes the other way.

It doesn't seem too much of a gamble to keep some of your Euros in a Euro bank account. You earn some money in Euros, you spend money in Euros and, if you move there, you're going to need to buy / rent accommodation priced in Euros.

No point making it complicated.