UK - Goldman Sachs Asset Management (GSAM) has lost a London-based pension fund 19% of its initial investment in a currency overlay mandate in its first year of operation.
SAUL, the superannuation arrangements for the non-academic staff of the University of London, invested £23m in a currency overlay pooled fund on 31 March 2004 with GSAM. By September, the value of the mandate had dropped to around £15m before recovering to £18.7m by 31 March.
The last five quarters have been very testing for currency overlay managers, with the average manager returning -0.2% versus the benchmark, according to the Mercer currency overlay universe. For the year to 31 March, 2005, average fund manager performance compared to the benchmark was -0.6%, just above the worst ever performance of -0.7% for the year to 31 March, 2000.
Penny Green (pictured), CEO, SAUL Trustee Company, said the fund opted to appoint a currency overlay manager a year ago for alpha generation rather than risk control. Despite the diminution in asset value, Green said the decision must be looked at in a long-term context.
“We have not seen the anticipated rewards but are taking a long-term view,” she said. “Whilst our experience has been disappointing...any pension fund that is an immature pension fund and is not repatriating assets overseas is not doing their job properly if they haven’t at least considered currency overlay because in the long term it will add value.”
GSAM declined to comment.
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