Investors should treat currency as an important determinant of investment outcomes, says Urs Brutsch, Singapore-based regional head, ABN Amro Private Banking.
'Of course, currency movements are hard to predict,' he says. 'In client portfolios, being in the right currency is the most important decision you have to make. Whether you are investing in Hong Kong or Swiss equity, the correlation with equity markets is fairly high [i.e., they follow each other up and down].
'Studies on what contributes to performance in a portfolio have shown that the currency influence was in many cases the most important.
'Of course, the asset class is important, whether you invest in equities, fixed interest or whatever. But it is equally important to be in the right currency.'
Mr Brutsch cites as an example the euro, which has appreciated about 18 per cent in recent months.
'It has strengthened a lot. So if you are in, say, US stocks, and they rise by 10 per cent but you are down in the currency by 18 per cent, you are minus eight, basically.'
