Falling pound and overseas investments.

longman27

I have money in a Standard Life Wrap that is invested in the U.K, the U.S and far east (so I'm told). I assume they have to buy the overseas investments in dollars so my question is, if I sell these and they are paid back into pounds will I gain from the pounds fall in value?

My guess is that as a smaller investor I get shafted both ends but I'd like to be proved wrong.

Thanks.  

Albermarle

Yes the drop in US markets this year has been moderated for UK investors, by the strong Dollar. 

masonic

Investing in international investments (including those listed in the UK, but doing lots of business overseas), protects you from the damaging effects of our currency being trashed.

MK62

masonic said:

Investing in international investments (including those listed in the UK, but doing lots of business overseas), protects you from the damaging effects of our currency being trashed.

......but the flip side is that if you invest after our currency has been trashed, and sterling appreciates after you've invested, your overseas investments might then get trashed......swings and roundabouts.

Nobody can say for sure whether GBP's current decline is over (though personally I think not) or whether it will be permanent (or rather effectively permanent with regards to your investment timeframe)........

masonic

MK62 said:

masonic said:

Investing in international investments (including those listed in the UK, but doing lots of business overseas), protects you from the damaging effects of our currency being trashed.

......but the flip side is that if you invest after our currency has been trashed, and sterling appreciates after you've invested, your overseas investments might then get trashed......swings and roundabouts.

Nobody can say for sure whether GBP's current decline is over (though personally I think not) or whether it will be permanent (or rather effectively permanent with regards to your investment timeframe)........

When you own an asset with intrinsic value, it is not linked to the fortunes of a currency. It is valued on its future income streams, which will adjust to currency fluctuations in the long run. A strengthening currency will have more buying power, but the asset is worth the same.

If GBP is trashed and then undergoes mean reversion, then cash could be the best performing asset class of the time.

MK62

masonic said:

MK62 said:

masonic said:

Investing in international investments (including those listed in the UK, but doing lots of business overseas), protects you from the damaging effects of our currency being trashed.

......but the flip side is that if you invest after our currency has been trashed, and sterling appreciates after you've invested, your overseas investments might then get trashed......swings and roundabouts.

Nobody can say for sure whether GBP's current decline is over (though personally I think not) or whether it will be permanent (or rather effectively permanent with regards to your investment timeframe)........

When you own an asset with intrinsic value, it is not linked to the fortunes of a currency. It is valued on its future income streams, which will adjust to currency fluctuations in the long run. A strengthening currency will have more buying power, but the asset is worth the same.

If GBP is trashed and then undergoes mean reversion, then cash could be the best performing asset class of the time.

Hmmm.....not entirely sure what you are saying here.. ....my "international investments (including those listed in the UK, but doing lots of business overseas)" are most certainly linked to the fortunes of GBP, and a strengthening GBP, while it would have more buying power (in terms of buying those overseas investments), will certainly mean those I already own are not worth the same, in GBP, even if they are still worth the same in USD/EUR/JPY etc.......

Nebulous2

I bought a global tracker VWRP at near enough the low in June for £76 per share (Or ETF)  Global markets are now near enough at the lows they were at then, and if the price was right I'd pick up some more - but they are now at £83.50. 

The gain I've made since June is almost entirely because the pound has dropped, particularly against the dollar. 

Linton

MK62 said:

masonic said:

MK62 said:

masonic said:

Investing in international investments (including those listed in the UK, but doing lots of business overseas), protects you from the damaging effects of our currency being trashed.

......but the flip side is that if you invest after our currency has been trashed, and sterling appreciates after you've invested, your overseas investments might then get trashed......swings and roundabouts.

Nobody can say for sure whether GBP's current decline is over (though personally I think not) or whether it will be permanent (or rather effectively permanent with regards to your investment timeframe)........

When you own an asset with intrinsic value, it is not linked to the fortunes of a currency. It is valued on its future income streams, which will adjust to currency fluctuations in the long run. A strengthening currency will have more buying power, but the asset is worth the same.

If GBP is trashed and then undergoes mean reversion, then cash could be the best performing asset class of the time.

Hmmm.....not entirely sure what you are saying here.. ....my "international investments (including those listed in the UK, but doing lots of business overseas)" are most certainly linked to the fortunes of GBP, and a strengthening GBP, while it would have more buying power (in terms of buying those overseas investments), will certainly mean those I already own are not worth the same, in GBP, even if they are still worth the same in USD/EUR/JPY etc.......

A globally traded share, for example BP, must be the same across all exchanges.  Otherwise there will be money to be made by buying on one exchange and selling on  another.   If the £ increases in value against the average trading currency then the price in £ must fall.

Next look at a company solely listed in the UK in £s but with high foreign sales.  If the £ rises against other currencies and the amount and local price of goods sold outside the UK remains the same then the value of those goods in £s will fall and hence so will the profits in £s leading to a fall in the £ share price.

masonic

MK62 said:

masonic said:

MK62 said:

masonic said:

Investing in international investments (including those listed in the UK, but doing lots of business overseas), protects you from the damaging effects of our currency being trashed.

......but the flip side is that if you invest after our currency has been trashed, and sterling appreciates after you've invested, your overseas investments might then get trashed......swings and roundabouts.

Nobody can say for sure whether GBP's current decline is over (though personally I think not) or whether it will be permanent (or rather effectively permanent with regards to your investment timeframe)........

When you own an asset with intrinsic value, it is not linked to the fortunes of a currency. It is valued on its future income streams, which will adjust to currency fluctuations in the long run. A strengthening currency will have more buying power, but the asset is worth the same.

If GBP is trashed and then undergoes mean reversion, then cash could be the best performing asset class of the time.

Hmmm.....not entirely sure what you are saying here.. ....my "international investments (including those listed in the UK, but doing lots of business overseas)" are most certainly linked to the fortunes of GBP, and a strengthening GBP, while it would have more buying power (in terms of buying those overseas investments), will certainly mean those I already own are not worth the same, in GBP, even if they are still worth the same in USD/EUR/JPY etc.......

A business will buy goods and services, produce things, and sell them. Those goods and services will change in price to reflect changes in the currency. When things get more expensive for companies to buy, they will tend to put up their prices. They may have their margins squeezed from time to time, but in the long run they'll be targeting some level of profit from their operations, or the business will fail. Their volume of sales could go up or down, affecting their value, but this generally won't be as a direct result of any single currency changing in value, other than the case I mention below.

Goods and services are normally sold internationally. This will include those a company buys, and those it sells. If there was some sort of mispricing, whereby they could be bought or sold more cheaply in one currency than another because of forex movements, then there would be money to be made buying them in one currency and selling them in another. While something like that may happen transiently, it's not going to be long before pricing is adjusted to close any arbitrage.

One area where currency could impact a business is when most of its earnings come from a single country, such as the UK, where it's end consumer is becoming disproportionately impoverished as a result of policies affecting both their wealth and their currency, and so sales are shrinking. So, for example, a FTSE250 investment where many of the businesses are tied to the UK economy could perform more poorly compared with a FTSE100 investment where "70%" of earnings come from overseas. It's probably not the case that consumer spending has been impacted to a much greater degree in the UK than elsewhere in the world, despite out currency weakening.

Alistair31

Nebulous2 said:

I bought a global tracker VWRP at near enough the low in June for £76 per share (Or ETF)  Global markets are now near enough at the lows they were at then, and if the price was right I'd pick up some more - but they are now at £83.50. 

The gain I've made since June is almost entirely because the pound has dropped, particularly against the dollar. 

Yes, definitely quite annoying when you are wanting to buy.

Millyonare

I've started to hedge some of my overseas investments.