GLOBAL - Active currency managers face difficult conditions to deliver on a slew of new pension fund mandates, according to consultants.
Phil Page, client manager at Cardano, explained the firm had advised on and seen a number of active currency mandates recently, due he believed to the fact that the currency market had typically been an area that active managers had found it easy to outperform in.
Michael Schlachter, managing director of Wilshire Associates, commented: "Active currency managers may now see less success than in previous years, with things like the Yen carry trade, the low hanging fruit, finally gone."
Page also warned that currency managers would find it harder to outperform going forward.
"It is increasingly the investors that are driving currency prices and we think the market is becoming more and more efficient, so the choice of manager is more important. You should be more selective as you could potentially produce negative returns," he said.
Schlachter said US pension funds used less active currency.
"I think we are seeing clients looking at currency as a potential for value added, using it as an overlay. It is not being implemented as a separate allocation," explained Schlachter.
Page also noted there had been a strong move in the UK to active currency, but less so in the Netherlands, where currency risk was passively hedged.
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