Anita Higgins, director of institutional business at BGI, said the group's currency funds now run £27 billion of assets compared with £5.8 billion in 1999. She reported significant interest in a currency-hedging fund BGI launched last year. Aimed at small and medium-sized UK pension funds, it offers hedging against the average UK pension fund's overseas exposure.
The UK's Record Currency Management has seen a big increase in demand for its services that are tailored to pension funds. Chief executive Neil Record said funds under management doubled in the year to July to $16 billion. He noted the recent devaluation of the dollar has ignited an interest in controlling currency risk. He said the dollar’s fall to $1.90 to the pound hindered equity managers’ efforts at effective stock selection, instigating demand for stripping this risk out.
Muysken said the two main factors driving demand for currency management are a reduction or risk linked to holding equities listed in different world currencies, and a desire to add value by delivering returns through active currency management. While a greater proportion of US pension funds traditionally used some form of currency overlay, interest there has dipped as it has grown in the UK, he added.