Merrill Lynch in drive to promote active currency risk management

Any investor with international dealings should examine their currency exposure in a systematic way and treat foreign exchange as an asset class, according to securities house Merrill Lynch.

In a report – On Currency Overlay: Call the MLCOPs! – released this week to investors, Merrill Lynch argued that now is an ideal time for active currency management in equity and fixed-income portfolios. “It is not only a risk reduction tool but also serves to enhance returns,” said Merrill Lynch in the report.

The securities company is using the report to promote Merrill Lynch Currency Overlay Portfolios (MLCOPs), which it said are aimed at providing a disciplined approach to managing forex risk. Its flagship ‘Currency Only MLCOP’ invests in G10 currencies and uses Merrill’s six month forecasts.

Banks report increased interest in currency overlay – the treatment of forex as an asset class where positive returns can be made – as a result of falling equity returns and low interest rates.