IMA reviews currency exposure in fixed income funds

Kames Capital fund manager Stephen Snowden says the Investment Management Association is in talks with fund groups about exposure to currency markets after finding some fund managers in the Sterling Corporate Bond sector are using currency as a large part of their portfolios.

Snowden says currency exposure – as well as equities exposure – should be limited to 5 per cent because larger bond funds are using the investment powers to increase returns in a market where liquidity remains tight in corporate bonds.

Snowden says: “The IMA is consulting on the 20 per cent rule, which was there to facilitate a degree of accomodation and prevent things becoming unneccesarily restrictive. The worry is whether that has been exploited and whether people are putting too much equity and currency risk into bond funds.”

The IMA has confirmed there is a fixed income project underway but no details can be confirmed at this stage.