The pair say the currency will suffer as the US dollar gains strength, a phenomenon which could see other Australian assets hard hit.
"As the cyclical attractions of the US dollar are rising, those of the Australian dollar are fading," they said.
"An expensive valuation and shaky fundamentals make it vulnerable over the medium-term. Other Australian assets may also underperform from here."
"The Australian dollar has been a star performer among the world’s 10 big currencies over the past decade. However, we believe its fortunes are likely to change."
"In our view, fundamentals suggest that the Australian dollar is living on borrowed time," they said.
"Investment in the country’s mining sector is likely to peak soon (and decline thereafter), while public demand is likely to slow due to planned fiscal consolidation and the exact path to a rebalanced economy remains uncertain."
The analysts also warned about Australia’s high level of debt, at around 58 per cent of GDP, and pointed out that much of Australia’s foreign liabilities have been through highly volatile portfolio flows, particularly debt, which they say poses a risk to the currency over the medium-term.
"We see a weak Australian dollar as the flipside to a strong US dollar: while the US dollar may gain pro-cyclical attributes and benefit from positive local economic news, the reverse should be true for the Australian dollar."
According to FE data, 67 funds in the IMA universe have more than 10 per cent invested in Australia.
Both First State Asia Pacific and First State Asia Pacific Leaders have roughly 15 per cent invested in the nation, with companies such as Newcrest Mining and QBE Insurance Group featuring in their top-10 holdings.
The First State funds have been standout performers in the IMA Asia Pacific ex Japan sector, beating it over one, three and five years, and 10 years as well in the case of the Asia Pacific portfolio.
Over the last five years, the funds have returned 80.94 per cent and 73.89 per cent respectively, while the sector and MSCI Asia Pacific ex Japan index each gained just below 44 per cent, according to FE Analytics.
Performance of funds vs sector and index over 5yrs
Source: FE Analytics
Australia & New Zealand Banking Group is the second-largest holding in the £4bn Newton Asian Income fund.
Overall, the fund has 32.59 per cent invested in Australasia, a region comprising Australia, New Zealand, New Guinea and the neighbouring Pacific Ocean islands.
The Schroder Asian Income and Schroder Asian Income Maximiser funds each have more than a quarter of AUM invested in Australia, with Australian & New Zealand Banking Group, National Australia Bank and Australian metal, plastic and paper packaging manufacturer Amcor among their top holdings.
General insurance provider Suncorp is also one of the top holdings in the Schroder Asian Income fund.
The income portfolios are all standout performers in the sector.
Over the last three years, the Newton portfolio has been the clear leader, returning 64.48 per cent, compared with top-quartile returns of 47.71 per cent from Schroder Asian Income and 40.35 per cent from Schroder Asian Income Maximiser.
The IMA Asia Pacific ex Japan sector gained just 25.95 per cent over the period.
Performance of funds vs sector over 3yrs
Source: FE Analytics
While these leading funds all have significant exposure to Australia, their weightings are primarily in the financial sector.
Ten funds in the IMA sector have Australian miner Newcrest Mining in their top-10 holdings, a company that could be hard hit by an aversion to the mining sector, according to the Barclays analysts.
Two of the funds with a high exposure to the company are FE Alpha Manager Evy Hambro's £2.1bn BlackRock Gold & General portfolio, which holds 7.2 per cent of AUM in the stock, and his BlackRock World Mining IT, with 2.9 per cent of AUM.
Perhaps more threatening should Krpata and Joyce’s predictions come to pass is exposure to Australian multinational mining and petroleum firm BHP Billiton, which is a top-10 holding in 149 funds in the IMA universe.
Among the funds with a high weighting to the company are Aberdeen Asia Pacific & Japan, BlackRock Global Funds Natural Resources and First State Global Resources.
The £3.6m JPM Global Mining fund has the highest weighting to the miner, at 10 per cent of AUM.
