The US dollar has climbed relentlessly against the pound in the past quarter, powering funds with a high exposure to dollar assets, and Edinburgh Worldwide (EWI ) takes the top spot.

US markets may have faltered against the expectation of higher-for-longer interest rates but the dollar has continued to strengthen against most major currencies as the US Federal Reserve left the door open to another rate hike and fewer cuts next year.

Against sterling, the dollar has risen 7.5% from a low point of $1.313 in mid-July to $1.215 at the end of September, with the greenback pushing up 4.1% against the pound in September alone.

Stifel investment company analyst Iain Scouller said the strong dollar has ‘made an important contribution to returns for funds that invest in US dollar assets’.

‘We expect currency volatility to remain an important factor in investors’ returns over the next few months given central banks may give more divergent signals on monetary policy,’ he said.

Scouller calculated the investment trusts he believed would provide a ‘ready-reckoner’ on currency sensitivity thanks to their US dollar exposure. As most trusts do not publish their sterling or other currency exposure, he said as ‘a proxy’ the geographic data published by the Association of Investment Companies (AIC) each month is a ‘good indication of sterling and US dollar exposure’.

According to this data, Edinburgh Worldwide, the £535m Baillie Gifford-run trust of US small caps, tops the board, with exposure of 72%. Its management team, headed by Douglas Brodie, has placed the biggest sector bets on software, biotechnology, and aerospace and defence.

Its largest holdings at the end of August were Baillie Gifford favourite Space Exploration Technologies, or SpaceX, run by Elon Musk, which made up 8.2%, Alnylam Pharmaceuticals, which is 7% of the portfolio, and UK-listed grocery delivery platform Ocado (OCDO) at 4.8%.

So far, the trust’s high exposure to the US dollar has done little to help the value of its underlying portfolio or stop its share price from sliding more than a fifth. Over the past year, its net asset value (NAV) has decreased 17.1% and its shares have lost 21%.

Still, Scouller maintained that dollar strength has had ‘a material positive impact’ on the NAVs of funds with high exposure to US dollar assets, pointing to Edinburgh Worldwide stablemate Scottish Mortgage (SMT ), which has half of its £11.5bn portfolio in US dollar-denominated assets. 

He estimates the trust has added more than 4% to its NAV since mid-July. Despite this, its NAV has declined 3.3% over the past three months due to the weakness of growth stocks. 

Sources: AIC and Stifel

Scouller estimated the NAV of JPMorgan Global Growth & Income (JGGI ) NAV has been boosted 5% by US currency strength over the same period but ‘again weakness in the equity portfolio has reduced the NAV return to 1% over the past three months’.

There are few trusts that hedge currency exposure regularly but Rothschild-backed RIT Capital (RCP ) is active and has an underweight to sterling that Scouller anticipates will have a negative impact on its returns. 

RCP’s sterling exposure was 42% of NAV at the end of August versus a 7% geographic exposure to the UK, while exposure to the US dollar was 38% against 59% of the portfolio invested in the US.