Investors in Asia keen to capitalise on sterling's weakness

Hedge funds among those homing in on assets pounded by Brexit

Stephen Diggle, whose Singapore- based hedge fund made a profit of US$2.7 billion (S$3.7 billion) in the depths of the global financial crisis, plans to boost his family office's investments in biotech companies in Britain after the Brexit vote sent sterling tumbling to a 31-year low.

His Vulpes Investment Management is also seeking to pour money into other industries in the United Kingdom that can benefit from a weaker pound, Mr Diggle said.

His firm, with about US$250 million, owns stakes of up to 22 per cent in six British biotechnology firms through its life sciences fund, and more than 2,000 apartments in Germany, Mr Diggle said.

"We are regarding this as a buying opportunity in sterling assets, especially for businesses which benefit from sterling being near a multi-decade low against the US dollar," he said last week.

Mr Diggle is just one of the rich Asia-based investors keen to pounce on the pound's 11 per cent fall since British voters decided June 23 to leave the European Union. UBS Group, the world's biggest private bank, and Stamford Management, which oversees US$250 million for Asia's rich, said some of those they advise are preparing to snare real estate bargains.

UBS clients have been paying back their pound mortgages following the currency's drop, said Mr Simon Smiles, the bank's chief investment officer for ultra-high-net- worth individuals.

Its wealthiest clients are also looking to snap up assets at distressed prices as British property funds began offering buildings for sale after investors sought withdrawals on concern that Brexit would cause property prices to fall.

"Clients I have been speaking to were asking when to buy the pound post its Brexit fall, not selling it," said Mr Smiles.

Sterling fetched US$1.3220 in early London trade yesterday, after reaching US$1.2798 this month, its weakest level since 1985. It was 1.7821 against the Singdollar.

Brexit has not dimmed the allure of owning property in London as the city "remains a key financial hub and a desirable destination", said Mr Jason Wang, CEO of Stamford Management in Singapore. Some of his larger property investment clients see the pound's current depreciation as a "good opportunity to pick up some prime London properties", he said.

Family offices are typically tailored to both investment and personal needs, including estate planning, philanthropy and maintaining homes. Mr Diggle said the pound's weakness is an advantage for the biotechnology companies Vulpes plans to put more money into. "We have great confidence that the current low level of sterling will be a direct and significant benefit to the bottom line of these US dollar-earning companies," said Mr Diggle, who set up Vulpes in 2011.

"From there, it is easy to extrapolate that other companies in the UK will have similar economic effects, so we have gone looking for bargains. British service firms that sell to the US are the most obvious."

While options traders are more pessimistic on the pound than any of its developed market peers, they are paying less to bet on its decline than they did last month.

Prime Minister Theresa May "should provide some pragmatic leadership in steering the UK through a manageable Brexit", said Mr Wang. "Sterling's recent rebound reflects that confidence in her political ability."


A version of this article appeared in the print edition of The Straits Times on July 20, 2016, with the headline 'Investors in Asia keen to capitalise on sterling's weakness'. Print Edition | Subscribe