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.
The week on Risk.net, November 25-December 1, 2016Receive this by email