Britannia Thematic 27 May 2010

As forecasted in April 2009, the Armageddon/Depression scenario did not materialise; Clients that currency switched out of USD & EUR into AUD & GBP last year have been rewarded; On a relative value basis we think that GBP is undervalued versus AUD.

In our April 2009 article published in The Hedge Fund Journal, we presented the rationale behind currency switching out of US Dollar (USD) and Euro (EUR) denominated funds, into Australian Dollar (AUD) and Sterling (GBP) denominated funds. This investment thesis stemmed from our belief that the world would recover and that we were not heading into a fierce deflationary cycle. With this in mind, we took profits on our safe-haven FX positions and moved into beat-up commodity and pro-growth currencies like the Australian Dollar and the British Pound during the months of March/April 2009. Those investors who made this tactical switch have subsequently been rewarded. The Australian Dollar has appreciated +21.6% against US Dollars and +31.0% against the Euro. Sterling has also appreciated albeit not as strongly, registering +9.5% against the Euro.

Although we are very pleased with AUD’s twelve month performance, we believe that GBP is undervalued relative to AUD and as a result we are advising our clients to lock-in their AUD profits and switch into GBP denominated share-classes.