Currency calls are strong way for absolute return investors to express views amid low volatility but with potentially destabilising events on the horizon.
Citywire + rated Cataldo has short currency positions on the Hong Kong dollar, the Singapore dollar, the new Israeli shekel, the new Taiwan dollar and the South Korean won.
He told Citywire Selector that, despite global economic data surprising to the upside, exporting nations, namely South Korea, could suffer from increased anti-globalisation rhetoric.
'We think the policy changes in the US, especially after the election and a possible threat to global trade could undermine the so-called manufacturing exporters.
'This may create a more favourable environment for global commodity exporters, on the other side we don’t think the central bank in South Korea will hike rates this year, it is quite possible that they might cut towards the end of the year.'
Cataldo said the fund’s 3.1% short position on the South Korean won, is a cost-effective hedge against the pick-up against capital outflows in Asia and the emerging markets more generally.
'South Korean points are negative and you are getting paid to be short the currency. When we look at the correlation between the dollar index and the Korean won, in the last decade it has been negative for very brief periods.
'If the Fed increases rates more than the market expects, this will push the dollar up in general and benefit our position,' he added.
Elsewhere, Cataldo said emerging market financials are posting decent results, following the credit cycle turning more positive in places such as Russia, Brazil and Nigeria.
'We remain contained and think that Turkish, Russian and Nigerian banks are among the most attractive in terms of risk return.'
'Of course, risk will remain high, so we are happy to take more Russian risk and selected Nigerian risk, while in turkey we prefer the shorter end of the curve due to political volatility.'
Cataldo said the team are also positive on the Mexican story and said they are currently looking to increase the fund’s exposure to the region. Cataldo said Mexico’s cheapest asset is its currency, where he currently has 1% of the fund.
'On the Mexican story, we think the weakness in the Mexican peso has already priced in the possible damage to the trade relationships with the US.
'There is also a possibility that things might not go as bad as people think, and that the market might not price it as well, if that is the case then it could cause a reversal in the price action.'
Despite this favourable stance on emerging markets, Cataldo said he is shorting South Africa due to the abundance of political uncertainties the country is currently facing.
'We think political uncertainty will affect consumer confidence throughout the year. The country is a candidate for a downgrade from rating agencies this year.
'Although the external adjustments for the country are on track, given the improvements in terms of trade we don’t see any solid plan for reforms for increasing the productivity and potential growth in the country.
'We prefer other emerging markets where the cycle has bottomed and there are decent growth signals picking up, in countries such as Russia and Brazil and recently tactically - even Turkey against South Africa.’
The Pioneer Funds Multi-Strategy Growth fund returned 13.2% in euro terms over the three years to the end of February 2017, in the multi-strategy category. This compares with a sector average of 4.9% over the same time period.