Frances Maguire
Frances Maguire

e-FX - The Pension Fund Manager perspective

At one time it was only the hedge funds that actively traded FX, but Frances Maguire finds that that is no longer the case and that pension fund managers are increasingly looking to FX as a source of alpha and using electronic trading platforms to trade it.

Trading FX as a separate asset class is no longer the preserve of the hedge funds. As pension funds try to improve returns they are increasingly looking towards FX and the active management of currency risk as a source of alpha. The added benefits are that currencies bring greater diversification to an investment portfolio, with low correlation to other traditional pension fund assets, and pension fund managers are accessing one of the world’s most liquid markets via low cost electronic trading platforms. Foreign exchange has often been viewed as an alternative asset class, rather than as a comparable asset class to bonds and equities, due in part to the absence of a widely followed benchmark and ignorance of the return characteristics of FX. The question now is not so much whether FX exposure should be included in global portfolios but rather, how much. Research published by Deutsche Bank last August suggested that for global portfolios to benefit most from foreign exchange, allocations to FX...continued

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