A Case for Currency in Institutional Portfolios

Momtchil Pojarliev and Richard Levich

Since the early 2000s, we have investigated extensively the theory and practice of currency investing.11See http://people.stern.nyu.edu/rlevich/research.html for more than dozen co-authored papers and essays, including A New Look at Currency Investing, published in 2012 by the CFA Research Foundation. Our research has developed empirical evidence on the risk and return of the most prominent styles of currency investing. We have measured the returns of individual currency managers as well as groups of managers, and assessed their performance against conventional as well as more demanding benchmarks. In addition, we have studied how different currency investment styles can impact the performance of a well-diversified portfolio of global stocks and bonds. At the heart of this research, there remains a fundamental question: “Does currency investment, whether in the form of style investing that seeks to earn beta returns or discretionary managers mandated to hunt for alpha, deserve to have a place in an institutional portfolio?”


The question is controversial. As a result, and as this chapter will elaborate, currency investing appears to be overlooked and has

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