Currency fund manager Axel Merk says investors need to throw out the risk-free component of their portfolio, as there is no such thing as a “safe” asset anymore.
Speaking Saturday at the FPA’s national conference in San Diego, Merk (left), president and CIO of Merk Investments, said investors need a proactive and diversified approach to their positions even in cash. He cautioned that currencies are at risk of losing their traditional function as a “store of value;” the implications of such an environment, he said, are far-reaching.
“Government and central banks have gotten involved to the point where correlation with traditional asset classes is breaking down,” Merk told AdvisorOne following his presentation.
Asked specifically about the Swiss government’s decision to cap the franc earlier this month, Merk noted he had reduced his position to 1.5% of the portfolio on anticipation of the measure.
“Any time volatility is below normal, we take a step back,” he said. “That’s what was happening with the franc, and we pared back our position.”
He said Swiss National bank Chairman Philipp M. Hildebrand tried to peg the franc in 2009, but did not have the political support.