Currency fluctuations hit AMP fund

The rapidly declining fortunes of the Australian dollar have impacted a number of fund managers, with ratings house Standard & Poor’s having placed the AMP Capital Total Return Fund ‘on hold’ after receiving notification that the fund had changes its currency hedging policy.

S&P Fund Services analyst Simon Scott said in a similar fashion to most locally-offered fund of hedge funds, AMP Capital Investors had been struggling with its cash management due to the extreme moves of the Australian dollar requiring a much higher level of funding than anticipated.

He said AMP Capital had decided it would prefer to remain fully invested rather than keeping higher cash levels and therefore changed its position on currency hedging.

“The fund used to be fully hedged at all times; but now, although the intention is to be fully hedged, the fund can be partially hedged or fully unhedged if it is deemed in the best interests of all investors in the fund,” Scott said.

He said the ratings house was awaiting a meeting with AMP Capital to understand the full extent of the policy change and its proposed implementation.

“While it may be suitable to allow a more flexible policy during current market conditions, S&P needs to gain comfort that the fund manager has the requisite skill set and experience to form and execute these currency views in conjunction with the maximum three times leverage available in the product,” Scott said.

The ratings house said it would review its ‘on hold’ rating for the fund once it had met with the company.