This summer has been "a baptism of fire" for Standard Life Investments' £18.5bn Global Absolute Return Strategies(GARS)fund, according to strategist Andy Ford.
GARS lost 2.2% in June before returning 1% in July, as a number of key trades failed to pay off.
Here, Ford tips three of the fund's highest-conviction strategies - and highlights three that didn't work out.
Trades to generate performance...
1. Long US dollar v short Canadian dollar
The currency strategy was one of the best performing in June following Fed chairman Ben Bernanke's announcement on the tapering of bond purchases.
"There are various issues in Canada. We think there is a bubble in the housing market with bad debts yet to come to fruition," Ford said.
2. Long Mexican peso v short Australian dollar
This strategy was GARS's best performer in July, returning 0.3% and taking profits on the trade to 0.8% year-to-date.
Increased Mexican competitiveness combined with the impact of falling commodity prices on Australia presents the ideal pair trade, Ford said.
"We are big fans of Mexico: wage differentials between China and Mexico were 50% ten years ago, now they are pretty much even, and in five years wages in China will be 50% higher. The default location for manufacturing is no longer China, especially for exporting to the US.
"It is also likely there will be further rate cuts in Australia, with most commentary saying the Aussie dollar is too high."
3. Long US tech v Taiwan
"This trade is all about the value chain," Ford said. "We like US tech beause it is the only sector with net cash, and a very supportive trend in consumer demand. Companies in the NASDAQ have ‘economic moats', like intellectual and pricing power.
"In the MSCI Taiwan, by contrast, there is very little pricing power, and Chinese companies are eating their lunch by copying their products."
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