The pound’s weakness is an advantage for the biotechnology companies Vulpes plans to put more money into, Diggle said.
“We have great confidence that the current low level of sterling will be a direct and significant benefit to the bottom line of these U.S. dollar-earning companies,” said Diggle, who set up Vulpes in 2011. “From there it is easy to extrapolate that other companies in the U.K. will have similar economic effects, so we have gone looking for bargains. U.K. service companies that sell to the U.S. are the most obvious.”
Pound Premium
While options traders are more pessimistic on the pound than any of its developed-market peers, they’re paying less to bet on its decline than they did last month. The premium for three-month contracts to sell sterling versus the dollar over those to buy has narrowed to 1.72 percentage points, compared with 6.39 percentage points on June 14, risk-reversal prices compiled by Bloomberg show.
Sterling gained 1.8 percent last week, its strongest weekly performance since March, as the appointment of Theresa May as Prime Minister returned a sense of political stability to the U.K. and the Bank of England unexpectedly kept interest rates unchanged.
“Theresa May should provide some pragmatic leadership in steering the U.K. through a manageable Brexit,” said Stamford Management’s Wang, who holds a degree from the London School of Economics and once worked as a hedge-fund manager in the British capital. “Sterling’s recent rebound reflects that confidence in her political ability.”