A Trump win: A global fund factor analysis

Added 3rd November 2016

Global markets are clearly jittery ahead of next week’s US presidential election.

A Trump win: A global fund factor analysis

And, while a broad impact will be felt should Donald Trump come out victorious, certain areas of the market are likely to be harder hit than others.

New data from fund research house, PureGroup, looking at the sensitivity of global funds to the potential fall out from a Trump presidency, sees the sector pretty well balanced.

According to the firm the immediate reaction would be an expansion in default spreads both in the US and further afield, especially within emerging markets, and a softening in the dollar; the US trade weighted index is up 23% over five years, and could fall quickly.

In light of this possible scenario, the firm has examined the sensitivity of global funds registered for sale within the UK with more than £250m in assets under management to a widening of global and US default spreads and a softening dollar.

According to the firm’s macroeconomic factor model, of the funds examined 58% are positioned well to respond to an increase in default risk markets, while 56% would respond well to flat or negative global term spreads.

 

However, the firm added, only 2.7% will respond well to a significant negative move in global term spreads.

 

 

In terms of the impact of the dollar, 46% of global funds would do well or remain neutral in the face of a falling dollar, while 7.6% will respond well to a significant softening in the greenback.

 

Patrick Murphy, MD at Puregroup said: “If we assume the more pessimistic position that evolves into a more sustained cycle of wider US and Global default spreads combined with a softening of USD Trade Weighted Index, some of the most sensitive funds are the MLIS Marshall Wace Tops UCITS Fund (Market Neutral), BlackRock Global Funds - Global Dynamic Equity Fund, and PIMCO RAE Fundamental PLUS Global Developed Fund which are expected to perform well and Investec Global Dynamic Fund, BlackRock Global Funds - Global Equity Income Fund and Invesco Global Structured Equity Fund to face challenges.   

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About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.

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