UK - The £1.08bn (€1.36bn) pension fund of the UK local authority Bedfordshire county council has revealed it wants to increase its currency exposure to 5% within the next few months.

Geoff Reader, head of pensions and treasury management at the authority, told IPE one of the fund's two currency managers, JP Morgan and FX Concepts, had delivered such good performance it has decided to increase the allocation to the asset class by 1%.

This increase in allocation would be undertaken "within the coming months", he added.

According to Reader, pension funds' generally varying experiences with currency as an asset class are down to the managers, because "they have very different styles".

This development may be somewhat of a surprise as a number of pension funds have recently stated their disappointment with the asset class.

Brian Bailey, director of pension at the £350m West Midlands pension fund, told the Asset Allocation Summit 2008 in London yesterday it is a "generally difficult period for active currency managers," adding the fund's currency managers had been underperforming.

The underperformance had been such that the fund's long-term return over five years had dropped to 13.8%.

He said it would be too early to make judgement calls on the asset class, though added that he is "cautious" about currency as an investment, branding active currency as a "high risk".

Despite bad performance, Bailey, however, concluded: "We won't give up on the asset class, we will continue investing," and managing currency risk is part of the asset allocation and risk management strategy.

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