Depending on whom you ask, you might hear that Britain is headed for a technical recession with the pound sinking even more in value relative to the dollar—or that the country is poised for economic growth post-Brexit. The currency’s value versus developed countries has fallen considerably since 2007. As of March 2021, it stands at around $1.38.
As such, the currency's relative weakness may provide an attractive entry point for investors willing to wait out the economic turmoil and bet on a recovery. If you are considering adding exposure to the British pound, these three exchange-traded funds (ETFs) may be a good place to start. (For related insight, read more on what every forex trader needs to know about the British pound.)
Note: Funds were chosen based on currency exposure and performance. All data is accurate as of March 27, 2021.
1. Invesco CurrencyShares British Pound Sterling (FXB)
- Issuer: Invesco
- Assets under Management: $166.4 million
- 2020 performance: 9.46%
- 2021 YTD performance: 2.28%
- Expense ratio: 0.40%
- Price: $132.60
FXB is one of two major players in the British pound space offering investors pure exposure to the British pound sterling. At a cost of 40 basis points, FXB employs the simple strategy of holding physical pounds on deposit, albeit in an uninsured deposit account at JPMorgan Chase & Co. The fund has good liquidity and tight spreads, making it easy to trade for even small investors. (For related insight, read about the bearish run for British pound ETFs.)
2. WisdomTree Short USD Long GBP (USGB)
- Issuer: WisdomTree
- Assets under management: GBP 3.5 million
- 2020 performance: 6.03%
- 2021 performance: 4.34%
- Expense ratio: 0.39%
- Price: GBP 36.44
In the U.K., WisdomTree also offers a comprehensive list of ETFs allowing investors to take various positions on the British pound.
This Short USD/Long GBP fund uses a synthetic index replication strategy. By taking the short position on the U.S. dollar and long position on the British pound, it seeks to benefit from a strengthening GBP versus the USD. Holdings in the fund include unfunded swaps with a counterparty. Daily cash payments between ETFs and the counterparty are transacted based on the fund’s holdings and values of the underlying instruments.