Insight's currency capabilities | Insight Investment

Investments in overseas assets can introduce currency risk, meaning exchange-rate movements may affect portfolio returns independently of the underlying investments. Effective currency management can help investors control unwanted risks, improve portfolio efficiency and align exposures with their investment objectives and governance requirements.

Insight provides a range of currency solutions, from passive hedging to dynamic and active currency management. These approaches can be tailored to each client's objectives, helping manage currency exposures as an integrated part of the overall investment strategy.

Insight provides a broad range of currency solutions encompassing dynamic currency passive management, hedging and active currency strategies. So, the team can control unwanted currency exposure or seek additional investment return opportunities. These approaches can be tailored to each client and help manage currency as an integrated part of their overall investment strategy.

Insight’s Currency Solutions Team has worked with institutional investors since 1991. Its skills include portfolio management, quantitative research, discretionary macroeconomic analysis, trading, collateral management and operational implementation.

Institutional investors can have very different objectives for managing currency exposure. Some may seek to reduce the impact of exchange-rate movements through passive hedging, while others may adopt dynamic or active approaches to help manage risk or pursue additional return opportunities. Currency-management solutions can also be designed to support specific governance, liquidity and operational requirements.

Insight can tailor portfolio construction, hedge benchmarks, collateral arrangements, implementation procedures and reporting to each client's asset allocation, risk tolerance and investment objectives. Solutions can also evolve over time as requirements change, for example by moving from passive hedging to a dynamic approach or by adjusting hedge ratios and operational arrangements.

Passive currency hedging is an investment approach designed to reduce the impact of exchange-rate movements on the value of overseas assets. Typically, a fixed hedge ratio is maintained against a predefined benchmark, helping investors manage unwanted currency risk without making active currency views.

Insight's passive currency strategies aim to deliver the benchmark hedge return at minimal cost. To achieve this, the team focuses on factors including tracking error, liquidity, counterparty exposure, operational efficiency and best execution. Insight also provides transparent reporting to help clients understand the effectiveness of their hedge and the factors influencing performance. The service can be tailored to each client's benchmark and governance requirements.

Passive, dynamic and active currency management are designed to achieve different objectives. Passive currency management aims to reduce unwanted currency risk by maintaining a predetermined hedge ratio against a benchmark. Dynamic currency management adjusts hedge ratios over time in response to market conditions, seeking to reduce the impact of adverse currency movements while retaining some potential upside. Active currency management goes further by taking investment positions designed to generate additional returns from currency markets.

Insight offers all three approaches. Its passive currency strategies aim to deliver benchmark hedge returns efficiently and at low cost. Dynamic strategies adjust hedge ratios using signals such as momentum, volatility, value, carry and quality, with the objective of improving outcomes relative to a static hedge over time. Active currency portfolios combine quantitative and macroeconomic analysis to identify potential return opportunities and can be implemented using quantitative, discretionary or blended approaches, depending on a client's objectives and risk budget.