The Role of Currency in Institutional Portfolios
First published:
ISBN: 9781782720942
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A Case for Currency in Institutional Portfolios
A Case for Currency in Institutional Portfolios
The Currency Conundrum: Regret Versus Optimal Hedging
Global Asset Allocation and Optimal US Dollar Hedging
Alternative Currency Hedging Strategies with Known Covariances
Strategic Asset Allocation and Currency Betas
Separating Currency Returns from Asset Returns in Theory and Practice: Conscious Currency and Beyond
Economic Data Surprises and Currency Alpha
Is Trend Following in Foreign Exchange Markets Going Out of Fashion?
The Carry Trade: The Essentials of Theory, Strategy and Risk Management
Carry Trades in Emerging Markets
Investing in Emerging Market Currencies: A Rewarded Risk
The Currency Investing Process: Managing G10 Currencies
Systematic Currency Trading
A Discretionary Approach to Currency Investing
Due Diligence as a Source of Alpha
Currency Forecasting: Generating Views about Foreign Exchange
Exchange Rates, Risk Premia and Inflation-indexed Bond Yields
Currency Investing: A Risk Premium Approach
Currency Management Styles: Ten Years On
The Future of Currency Investing in Institutional Portfolios
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 OVERLOOKED ASSET CLASS
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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