The CI Pension Fund Forum
active returns and we actively manage the hedge ratio internally depending on our view on the expected returns to local currency versus foreign currencies.
JwvO: A large part of the currency exposure leads to ULVN ZLWKRXW VXIÀFLHQW UHWXUQ ,Q WKLV FDVH FXUUHQF\ investments (hedges) are used to mitigate risk. There is a small allocation to currency strategies to improve the risk/return of the total portfolio.
How is your currency management process integrated into your asset allocation process – are overlay hedging strategies viewed as a standalone mandate?
KR: The strategic hedges of our clients (currency, LQWHUHVW LQÁDWLRQ DUH FHQWUDOO\ PDQDJHG E\ $3* AM’s Allocation & Overlay team. This team is responsible for managing our clients’ asset mixes and implementing positions to maintain FX hedges
54 Currency Investor | Autumn 2011
for our clients that e.g. change due to rebalancing the investment portfolio or from rolling positions that are about to expire. Within APG-AM all FX hedge related transactions are executed via APG-AM’s Treasury &HQWHU ZKLFK HQVXUHV D FRVW HIÀFLHQW LPSOHPHQWDWLRQ and exploits crossing opportunities.
NW: Currency is fully integrated into the asset allocation process. The decision on the benchmark hedge ratio is taken at the same time that we decide on our benchmark asset allocation. We dynamically manage the hedge ratio alongside the dynamic management of our market exposures. Currency management is undertaken internally and is part of the asset allocation process and not viewed as a stand alone mandate.
JwvO: 100% hedge of developed market currencies in our investment funds. A lower hedge ratio for reserve currencies is implemented via an overlay.
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