You will have heard and read about – or may even be involved with – the upcoming Scottish referendum. The people of Scotland have the opportunity to vote whether they should remain part of the United Kingdom, or become a separate country.
With the voting on Scottish independence approaching fast, we have made some adjustments to Nutmeg portfolios. It’s not our job to have a political opinion, of course. It is, however, our job to have a financial opinion and to take a stance on what the vote means for our customers’ investments. How they can profit, and how we can help protect their portfolios from potential loss.
We expect to see a ‘No’ vote. But we think that ‘Yes’ would see a temporary weakness in sterling. It could also be bad news for UK productivity, as an independent Scotland would mean operational changes for many companies.
As a precaution, we’ve made the following changes to Nutmeg portfolios:
- moved all investments in UK medium-sized firms (the investment is ‘FTSE 250 ETF’ in customer portfolios) into a US small company fund which has been performing in line with the UK mid-size companies index
- trimmed our UK large company exposure
- switched most of our hedged investments in US larger companies into the non-currency hedged equivalent (‘hedged’ means that we were investing in non-sterling denominated assets but linking the currency performance to sterling)
- topped up our Japanese equity position.
These changes give our customers more exposure to the strengthening US economy. They also avoid the weakness we expect in the pound and UK equities if there is a ‘Yes’ vote. Indeed, we have started to see this weakness manifest already, with a 1% fall in the value of sterling against the US dollar on Monday 8th September.
While we advocate investments in passive funds, particularly exchange-traded funds (ETFs), and do not support the practice of stock-picking, we regularly review the investment assets in customer portfolios and make any adjustments we think necessary. This ensures your money is still invested in the places we think best match your risk profile and investment goals.
Sources: Bloomberg and Macrobond
Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.