Standard Life's McVie downplays inflation fears

Tam McVie, investment director at Standard Life Investments, believes UK inflation fears have been overdone and is positioning the Global Absolute Return Strategies fund for a drop in the consumer price index.

McVie (pictured) has profited from the drop in the implied rate of the consumer price index to 3.2% in May thanks to a short on the index.

He has since removed that short position but said he is not worried about strong inflation.

‘We sold out when implied inflation fell, having bought in when it was at 3.5%, as it had added to performance,’ he said.

‘Inflation is now more of a possibility than before, but this is not a fundamental change, and we are not expecting rampant inflation.’

‘We don’t think inflation is a problem for now and we are not expecting it to be a big issue globally,’ he said.

Currency strategies on sterling and rand

The investment team running GARS are operating around 28 different strategies

The fund has a long position in sterling and is shorting the rand, which effectively means it is shorting gold given South Africa’s position as a large exporter of gold, said McVie.

‘By going short of the rand we are also short gold but we are comfortable with that as gold is a crowded trade,’ he said.

‘There are problems structurally in South Africa – for example it runs a current account deficit despite it being a commodity exporter – and the rand is expensive relative to the pound,’ he said.

A strong year