UK - Pension funds should be wary of investing in pharmaceutical, oil and gas, and engineering firms following a further slide in the US dollar, fund managers warn.
They point out that UK-listed companies in those sectors sell up to 50% of their produce to the US and will be “battered” by the weakening dollar, which slid to an 11-year low against the pound this month.
Standard Life Investments acting chief executive and chief investment officer Keith Skeoch encouraged UK investors to “rebalance” their portfolios.
“Companies quoted in the UK sell an average 25% of their produce in the US. In some sectors, such as pharmaceuticals, oil and gas, and engineering, the figure is closer to 50%.”
He added: “Our success in forecasting a move in the dollar allowed us to rebalance portfolios, for example taking profits in manufacturing and services companies with exposure to the US.”
Oil stocks wiped 14 index points off the FTSE100 this week as banks, insurers and multinationals with large exposure to the dollar were hampered by the threat of sluggish earnings.
UK-based fibre optic manufacturer, Bookham Technology, also warned this week that its fourth quarter sales would be hit by the weak US dollar, causing its share price to drop.
However, Skeoch said firms such as British Airways or Carnival Cruises that depended on the US market could benefit from the dollar’s drop.
Skeoch said: “As the boost to profits from a lower dollar is priced into the US equity market then more US households feel better off.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.