EUROPE/UK - New York-based currency manager FX Concepts has launched two new funds designed to provide European investment managers with a vehicle through which to hedge currency risk on US dollar and Japanese yen denominated investments.
The funds, designed in conjunction with Sogeposte - a leading French investment manager which has been using FX Concepts to manage its currency risk since 1999 - are the first structures of their kind created specifically for use by fund managers.
“Through the work we have done for Sogeposte over the past two and a half years we have gained a better insight into the needs of a fund managers,” said FX Concepts CEO John R. Taylor Jr.
The most important of these needs, according to Taylor, are “liquidity, transparency, tight risk control and minimal use of cash”.
Accordingly, the funds have been created with weekly liquidity, allowing managers to use them tactically in conjunction with their own strategic view of the currencies. Also, because the overlay program has been wrapped into a Luxembourg-listed fund rather than individually managed accounts it is more easily integrated into funds managers’ overall portfolios.
The fund is designed to give managers a high level of participation in the overlay program – up to 25 times equity – without tying up a significant amount of cash, as well as a guaranteed 4% stop-loss vs. benchmark. Performance for the two funds – one managing a short euro/US dollar exposure and the other a short euro/Japanese yen exposure – is measured against an unhedged benchmark.
“With the dollar trading near its long-term highs against the euro, this is an excellent time for European fund managers to consider putting such a currency overlay program into place,” said Daniel Szor, head of European marketing for FX Concepts.
The firm, which this year celebrates its twentieth anniversary, was one of the first currency overlay managers and today manages more than $4bn in overlay and absolute return strategies using proprietary quantitative technologies.
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