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.”
This week's edition of Professional Pensions is out now
MPs failed to place legislation into the Financial Guidance and Claims bill that would have made pension guidance default, which Just Group director Stephen Lowe said left a "bitter taste".
Aegon has called for the government to double the tax exemption on employer-arranged pension advice, up from £500 to £1,000.
Institutional investor confidence in Europe rose by 8.9 points in April with each region showing growing appetite for risk, according to State Street Global Exchange.