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How a $139 Billion Fund Is Trading the Trade War
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Loading...In a bid to beat the trade war, a $139 billion Australian investment manager is using 30-year Treasuries as its weapon of choice.
The ultra-long bonds are seen as a hedge to protect the portfolios of AMP Capital Investors Ltd. against the risks stemming from the U.S.-China trade frictions and less-synchronized global growth, according to Ilan Dekell. AMP Capital is also betting on a long dollar position against a basket of emerging-market currencies that have been sold off amid tightening liquidity in the greenback, he said.
“The best is probably behind us,” Dekell said, alluding to the environment of rising global growth and benign inflation seen earlier this year. “The trade war adds to our concerns -- our book overall is very conservative.”
Signs of growth peaking were underscored by China’s economic data. The world’s second-biggest economy saw its gross domestic product gain 6.7 percent in the latest quarter, compared with 6.8 percent in the previous three months. Industrial output in June missed estimates.
At the other end of the maturity spectrum, AMP Capital has been shorting two-year government notes as it sees the Federal Reserve raising interest rates two more times this year and thrice in 2019.
“If you go down the route of trade wars and people getting concerned about China growth, then that would put downward pressure on the Aussie,” he said.
Source: Bloomberg
Chart: Used with permission of Bloomberg Finance L.P.
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