Active risk mitigation strategy

Investment Objective:

To mitigate currency risk by adjusting the hedge ratio on individual currency exposures in order to protect investors from the adverse effects of currency movements.

Key Features:

  • Systematic approach that combines several factors in order to be confident of achieving robust results in all market environments
  • The investment process starts from a momentum strategy, which is modified and enhanced by two additional filters:
    • Option market data – various indications taken from the option volatility surface are used to adjust the hedge ratio
    • Macro views – when our discretionary team has a strong view, this is used to define the overall regime applicable to a given currency pair

Benefits:

  • Risk Mitigation: Seeks to reduce risks inherent in managing foreign exchange exposure
  • Specialisation: Investors can outsource currency risk management to a specialist rather than a generalist asset manager or custodian
  • Centralisation: Investors can use a single specialist to supervise and manage all of their currency risks
  • Customisation: Can be applied to any benchmark, with 0% to 100% hedge ratio

Hedge Ratios on Individual Currency Exposures are Systematically Adjusted

Hedge Ratios on Individual Currency Exposures

What Makes Us Different:

  • Disciplined and robust approach: The methodology is systematic and rules-based, and is designed to provide acceptable results in all market environments.
  • Designed for hedging: The investment process was developed specifically for hedging purposes, with a special focus on identifying dangerous situations and reacting with a prudent bias.
  • Widely applicable: The approach is based on clear and sensible principles, and can be applied to a wide variety of currency pairs, including emerging markets.
  • Continual research: The investment team is mainly composed of quantitative analysts, who monitor the latest academic research trends and continually research improvements to the methodology.

Solutions


Risk Mitigation


Manage Exisiting Risk


Absolute Return


Dynamic Currency Hedging

Solutions

Passive Hedging

Passive Hedging

Hedging individual exposures. Aiming at eliminating currency risk.

Dynamic Hedging

Dynamic Hedging

Hedging individual exposures improving on a static hedge

Active Currency Overlay

Active Currency Overlay

Transforming existing exposures improving risk-adjusted returns

Absolute Return

Absolute Return

Unconstrained, aiming at achieving uncorrelated returns

News & Media

FT Podcast, Currencies on the move

December 1, 2017

FT Podcast, Currencies on the move

Wall Street Journal Podcast: Where is the U.S. Dollar Going?

July 6, 2017

Wall Street Journal Podcast: Where is the U.S. Dollar Going?

Moody's downgrades China: What the fund managers are saying

May 26, 2017

Moody's downgrades China: What the fund managers are saying

FT Hard Currency Podcast: Smoking May, red-hot June

May 5, 2017

FT Hard Currency Podcast: Smoking May, red-hot June

Insights & Studies

Millennium Global Macro and Currency Outlook: Highlights Q4 2017

October 11, 2017

Millennium Global Macro and Currency Outlook: Highlights Q4 2017

Millennium Global Macro and Currency Outlook: Highlights Q3 2017

September 27, 2017

Millennium Global Macro and Currency Outlook: Highlights Q3 2017

The Importance of Addressing Currency Risk in an International Portfolio

January 18, 2017

The Importance of Addressing Currency Risk in an International Portfolio