Currency Risk Management Strategy
At Insight, we view unintended exposure to foreign exchange rates as a significant unmanaged risk in portfolios. Global currencies are prone to extreme moves, owing to structural breaks in drivers of currency or market cycles. Sources of returns and generators of losses can shift rapidly with significant portfolio consequences. Currencies exhibit multi-year trends that can erode an international asset portfolio.
Currency risk management approach
Source: Insight Investment. For illustrative purposes only.
WHY INSIGHT FOR CURRENCY SOLUTIONS?
Long track record: we have been managing currency risk for our clients for over 25 years, helping them to define policy objectives and constraints whilst assessing the trade-offs relevant to currency policy formulation.
Client focused: Currency Risk Management (CRM) is an active hedging programme that is tailored to manage clients' foreign currency exposure and risk sensitivity. It employs a proprietary, quantitative model with a highly flexible framework to accommodate a range of client requirements.
Advanced statistical modelling and monitoring: proprietary currency models monitor hedge levels and calculate adjustment trades.
Robust portfolio construction: we manage portfolios against a range of benchmark hedge ratios from 0% to 100% and adhere to strict downside loss constraints as well as incorporating a variety of value adding elements that seek to capture value as opportunities arise. CRM is a systematic programme that is supported by state-of-the-art infrastructure and an experienced trading desk with dedicated client portfolio managers.
Fund and strategy updates
Quarterly update: Australian Dollar Fair Value Estimates
Summary of the latest fair value estimates for the major Australian dollar exchange rates as at end Q2 2018
Monthly update: Currency Risk Management Strategy
In June, the representative CRM portfolio marginally outperformed the passive 50% benchmark by 0.07%. This was mostly due to a lower-than-benchmark hedge in the USD and JPY.
Currency risk management: a guide for Australian superannuation fund trustees
Guide to currency risk management | Australian superannuation funds typically have exposure to overseas investments, introducing currency risk. This guide explains how currency risk management works and the potential benefits.
Team statistics as at 31 March 2018. Assets under management (AUM) are represented by the value of cash securities and other economic exposure managed for clients.
The value of investments and any income from them will fluctuate and is not guaranteed (this may be partly due to exchange rate fluctuations). Investors may not get back the full amount invested. Past performance is not a guide to future performance.
Currency hedging techniques aim to eliminate the effects of changes in the exchange rate between the currency of the underlying investments and the base currency (i.e. the reporting currency) of the portfolio. These techniques may not eliminate all the currency risk.
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