GLOBAL - Barclays Global Investors has launched two currency funds - a sterling fund and a US equity fund - aimed at pension schemes.
BGI’s US Equity Ascent Currency Fund and its Sterling Currency Hedging Fund are pooled funds aimed at small to medium-sized schemes. BGI says both will provide schemes with cost-effective access to currency management.
Returns from international equity funds can be erased for UK-based schemes if the currency in question falls, but BGI claims its UK fund can reduce this by holding currency forwards. This effectively means the fund sells its holdings in non-sterling currencies and buys an equivalent holding in pounds.
And BGI claims its US Equity Ascent Currency Fund can improve returns on schemes’ international equity funds by being either over or underweight in 11 different currencies. The strategy will depend on the respective currency’s value, economic environment and market sentiment, and adjusting positions accordingly.
Currency strategist Andrew Dales said: “It can be argued that the currency management decision is second highest priority. Fund returns on international investments depend on both the asset return and the currency movements over the period of the investment.
“If the currency moves against you, any gain on the asset return could be lost. Hedging the currency risk can protect your investment from currency movements.”
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