Hedging Against Brexit

Any suggestions about how to hedge cash held in a SIPP against a possible Brexit resulting in sterling falling by as much as 20% according to some commentators?


  • Why do you want to hedge against a fall in sterling?, where is your risk of holding sterling assuming you are uk based with sterling requirements in retirement? a quid will still be a quid regrardless of the outcome.

    On to sterlings performance post vote, commentators talk of big falls, against which currencies are they talking? USD, EUR, trade weighted index or what.
    If sterling was to fall 20% for a leave vote, how much would it rise for a stay vote, if not much why arent the world and his mother short sterling, why are there not heavy falls (10+%) against every currency already as risk/reward is totally one way, where is the current volatility 5-10% daily swings that would accompany these sort of risks, not the 1% nonsense talked about against only the USD.

    A leave vote will be worse for the eurozone and EUR than GBP with the potential breakup scenarios.
  • So that's a "no suggestions " Blue mosel. Perhaps you might like to check out the affect of Harold Wilson devaluing the pound in 1967 when he quoted "the pound in your pocket is still worth a pound " for a comparison.
  • If the pound falls against the dollar and euro, then there will be a spike in inflation since we import more (physical) goods than we export. That would suggest inflation-linked bonds as a solution. A bit late to be doing something about it? Possibly better to have a balanced portfolio which will partially compensate. In the event of a remain vote, I would expect a strengthening of the pound and rally in UK company shares. If the Scottish referendum and general election are anything to go by, it would be better to check the betting odds than the polls. The opinions of a non-expert.
  • Consider buying an ETF, long Euro, short Sterling.
  • From some research sterling/Swiss Franc looks favourite but ha
    ven't found an ETF with this mix yet
  • Short Gilts (XUGS). Presently at highs, courtesy of ECB/Draghi. Would assume they would have to fall quite a bit, with investors selling and tax take from financial services declining.
  • I think you have to be really careful here as the market doesnt always do what you would logically expect it to do and could easily go in the opposite direction and against you. I hold a lot of cash - probably 80%+ of my PF since last summer and I haven't made any specific plans.

    If I were to do it Id probably open a currency hedge via a SB as its relatively cheap - with IG the minimum unit is 1 point which is effectively £14.3k of exposure - but if you consider this route make sure you understand the leverage and exposure here first so this is in no way a recommendation for you.

    I use SBs to hedge my equities from time to time (like now!). Looked at ETFs - be careful of the shorting variety and that they do indeed track what you want over a period of more than a few days. The synthetic ones can often track badly.

    Alternatively you could always go buy a big lump of gold - this has crossed my mind if we looked like having another financial crises!
  • For most people a SIPP is a main repository of savings for retirement and as such not a suitable place for speculative positions. A wide range of index funds and perhaps a few index linked gilts then forget about it, would be my choice.

    However to answer the question, an ETF linked to Gold will give you the 'hedge' you are looking for. Gold is priced in USD so any depreciation in Sterling will be reflected in a rise in ETF values and Gold is a good barometer of short term risk aversion, if BREXIT happens (<50% chance imo) then markets may hiccup badly. Even so I'd take 'profit' from this hedge fairly quickly as everyone will come round to the position that it really doesnt matter all that much after all eventually and markets tend to get to the heart of the matter sooner than one expects.
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