Active risk mitigation strategy
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.
- 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
- 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
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.