Exclusive: The investment trusts with most to lose if Sterling rises The investment trusts with most to lose if Sterling rises

Ian Scouller, investment trust analyst at Stiffel, has revealed the investment trusts with the most to lose in the event of a sharp rise in sterling.

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The pound has raced lustily ahead in the wake of Theresa May’s announcement of a General Election on June 8.

The market is taking the view that a comfortable win for May’s Conservative Party would lead to a greater level of policy certainty for markets and investors.

Scouller takes the view that a number of investment trusts made material gains over the past year from having an enhanced exposure to other currencies, and so benefited relative to their peers.

Stronger sterling would make those gains obsolete this year.

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Scouller commented, ‘Over 2016, gains resulting from sterling’s weakness was a key factor in the 20 per cent to 40 per cent {Net Asset Value} NAV total returns delivered by many of the equity funds that invest globally. In terms of scenarios, if on June 9th we have a new Government with a stronger working majority than at present (17 seats), which appears likely, but not a definite outcome at this stage, there may well be a strengthening of sterling. However, this would undo some of the Forex induced gains that many funds have benefited from over the past year.’

He continued that, ‘In order to highlight the funds which are most exposed to foreign exchange volatility we list them below based on their UK exposure as a proxy for their sterling exposure. We note that in 2016, sterling’s weakness was a key factor boosting the returns for many trusts with overseas exposure. For example, in the case of RIT Capital, there was a +12.1 per cent NAV total return, including a currency gain of 9.6 per cent.’

Below are the trusts potentially most impacted by the rise in sterling.

trusts to lose out if sterling rises



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