PRODUCT SPOTLIGHT
Reducing risk by gaining from the upward spiral of emerging-market currencies
Millennium Global has currency assets under management of over USD 13.0 billion and over the past 15 years has established itself as one of the leading providers of currency alpha solutions to pension funds through either currency overlays, managed accounts or funded vehicles. The news that splashed its way across the Wall Street Journal in early September this year, could be considered a marketing dream for the ÀUPV QHZ *OREDO (PHUJLQJ 0DUNHW &XUUHQF\ 3OXV 5LVN )LOWHU RU *(0 3OXV FXUUHQF\ VWUDWHJ\
assets on the continuing paranoia about global growth and the euro-zone debt crisis, all the characteristics of the market developments were a text-book case of why you should be interested in the company’s GEM Plus strategy. It is also the story of global growth trends.
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“Put simply it enables investors to increase their allocation to emerging markets in a risk-controlled way. They can access the growth opportunities in emerging markets while avoiding some of the extreme drawdowns,” explains Monica Fan, head of business development at Millennium. While the WSJ headline might give the impression that the latest global economic trauma shows that investors are apathetic to the opportunities found in emerging PDUNHWV ORQJHU WHUP ÀJXUHV VKRZ RWKHUZLVH 3HQVLRQ funds are casting their investment nets far wider than ever before and emerging market assets are a growing SDUW RI WKH JUHDWHU LQWHUQDWLRQDO GLYHUVLÀFDWLRQ VWRU\
“Emerging markets have traditionally been considered more risky than Europe or the US – until UHFHQWO\ 6LQFH WKH
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downgrading of bank credit ratings, the sovereign debt crises in Greece, Italy and Spain and beyond, have dispelled certain myths,” Fan says.
Growing importance of
Emerging Markets While allocations to emerging markets are up, Fan DOVR EHOLHYHV WKDW WKH\ GRQ·W UHÁHFW WKH JURZLQJ
72 Currency Investor | Autumn 2011
hile the headlines were screaming ‘Emerging market currencies beaten down’, blaming the sell-off of emerging market
importance of these markets to the global economy and that clever currency strategies can provide a GLYHUVLÀHG H[SRVXUH ZLWK JUHDWHU OLTXLGLW\ WR H[SORLW the more fundamental story. The emerging market VKDUH RI JOREDO ÀQDQFLDO LQGLFHV VWDQGV DW ZKLOH WKHLU VKDUH RI JOREDO RXWSXW VWDQGV DW
´3HQVLRQ IXQGV DUH JHQHUDOO\ DOORFDWLQJ XS WR RI their assets to emerging markets. One of the most FRVW HIIHFWLYH DQG PRUH LPSRUWDQWO\ OLTXLG ZD\V to invest in these markets is through emerging PDUNHW FXUUHQFLHV :KDW LV XQLTXH DERXW WKH *(0 3OXV VWUDWHJ\ LV LWV ULVN ÀOWHU µ VD\V )DQ 6KH DFFHSWV that the markets are not without their dangers, as recent sell-offs have shown, but generally longer- WHUP FRQÀGHQFH LV LPSURYLQJ ,QGHHG RWKHU ODUJH currency managers view that the emerging market growth story as an inevitable upwards movement of currency values. Record Currency Management advises against the cost of hedging this exposure in the longer term, believing they will only appreciate against today’s global reserve currencies and by 2025 the World Bank anticipates the Chinese renminbi will be one of three global reserve currencies.
“There are risks in any market, such as the introduction of capital controls, but the structural economic problems in the developed market and lacklustre returns, means there is still a big appetite for emerging market assets and one area of growth has been in emHUJLQJ PDUNHW À[HG LQFRPH µ REVHUYHV )DQ
Recent trends
Millennium, however has drawn some interesting conclusions from recent trends which it believes should
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