Dalton adds CHF class to European flagship for safety-seeking investors

Dalton Strategic Partnership has added a Swiss franc share class to its flagship European strategy, co-managed by Leonard Charlton, in response to appetite from both clients and own staff for a ‘safe haven’ base currency for their investments.

Magnus Spence, Dalton Strategic Partner partner and chief executive, said the addition – revealed publicly via a stock exchange notice on 29 August – had in fact taken place a while ago.

He added DSP added the class in response to requests both from external investors, and from DSP’s own management team, who are invested in Charlton’s strategy.

The strategy has been so successful, that DSP has capped inflows to both the offshore and onshore fund variants – the Melchior European and Melchior Selected Trust – European Absolute Return funds.

They hold a combined $548m, and manager Charlton (pictured) has no plans to gather more assets into them. DSP runs separate mandates alongside these.

The onshore fund is down 3.1% this year to July. Over this period it has been a testing market, with markets such as Belgium’s rising 14.8%, while Italy’s and Spain’s fell by 11% and 22.6% respectively. The core, of Germany and France, offered little with 5.45% and a 0.16% decline, according to S&P Dow Jones Indices.

The DSP strategy’s most memorable years were undoubtedly 2008, when it rose 6.3% in value while European shares plunged by over 40%, and last year when Charlton made 6.6% as his universe fell by over 10%.

The preference by some investors for accessing it via CHF exposure reflects a general hunger for ‘safe havens’ in the FX component of investments, as much as stability in focus markets.

Spence said nobody on Dalton’s own team was moving to Switzerland, which would make a Swiss franc class their natural entry path to Charlton’s fund.

“But the management team [also] wanted to have the CHF share class, as opposed to the euro or sterling”.

The onshore Luxembourg-based variant of the fund already has these currencies, plus US dollar and yen classes.

It is believed the external client requesting a CHF class from DSP has the Swiss franc as their ‘home’ currency.

The currency may well offer greater stability in coming days and weeks, not least if the European Central Bank unveils plans this Thursday that involve significant printing of more euros, which the markets could view as inflationary.

One global bond manager said if ECB measures disappointed markets, this could be the trigger that sends the euro down sharply versus ‘safer’ currencies, such as the Swiss franc and US dollar.

It is unlikely, however, that the CHF rate versus the euro will move beyond 120, as the head of the Swiss central bank today reaffirmed the resolution the bank made almost exactly one year ago to cap the franc’s value at 120 per euro.

The bank has this ceiling on the rate, as it believes its exporters would be at a competitive disadvantage if their goods became more expensive in euro terms.

Its head Thomas Jordan said in a speech: “We will continue to enforce the minimum exchange rate with the utmost determination, in line with our mandate.”


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