With a 20+ year track record of delivering better investment outcomes for our clients, we partner with our clients to manage more than A$23 billion in cash and fixed income assets, and A$86 billion in derivatives exposures6. Our team has the specialist skills and deep experience to manage the full spectrum of liquid market investment solutions, including cash and fixed income, a broad set of multi-asset derivative solutions and implementation.
In this edition, we dive deeper into one of the topics in this quarter’s The Basis to explore various approaches to currency hedging based on the underlying asset mix.
Tracking error tolerance, available liquidity and the mix of listed and unlisted assets are all important factors when determining the most appropriate FX forward tenor.
Types of underlying assets:
Minimising tacking error is the primary objective.
Small allocation to unlisted assets, ample contingent capital through liquidating listed assets.
Large allocation to unlisted assets, substantive risk to asset allocation to fund outflows
Access to capital throughout the life of the asset limited, settlement outflows cause distress
Match the currency hedge profile with available liquidity
Implementation focus is critical
Return impacts
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