one of the things that sets Brandywine apart from other investment managers is its ability to use currencies as another form of generating returns. “So what you often find when you look at the construction of their portfolios, is that the allocation to a country’s bonds often varies in relation to the amount of currency exposure they have to that country,” says Hansen.
A good example of this concept at work in the portfolio relates to the holdings of emerging market currencies and debt. The fund has a 42% exposure to emerging market bonds, but a 49% exposure to emerging market currencies. “Yes, they think emerging market currencies have been oversold on the basis of rising interest rates in the US (which will strengthen the US dollar). So they think emerging market currencies look cheap at the moment,” says Hansen.
Part of the optimism attached to emerging market currencies is linked to a very upbeat view of the global economy. “Brandywine think all the stimulation from creating large amounts of money in the economic system is going to come through in a big way shortly. They think the global economy will exceed growth expectations and that will be very positive for emerging markets too,” he explains.