Clywd scheme sees no mystery in currency

UK - Investing in currency funds is "nothing mysterious, just another investment opportunity", says a Flintshire county council official who helps to run the 563 million-pound (809.6 million-euro) Clwyd Pension Fund.

Dave Bamber, assistant county treasurer for the Welsh council, told a conference that currency funds could improve alpha – excess return - as returns from other asset classes fall.

Following a four-phase review, Flintshire has allocated 32% of the pension fund’s portfolio to alternative investments, including funds of hedge funds and currency funds, each getting a four per cent share.

The pension funds has split its 20 million-pound currency fund mandate between Gartmore Investment Management and Goldman Sachs Asset Management International on grounds of diversification and reduced manager risks.

The money has been diverted from the pension fund’s UK equity portfolio, managed by Fidelity Investments and Barclays Global Investors.

Bamber explained Flintshire had decided that currency funds was worth considering when a review of its tactical asset allocation revealed that this class constitute 40% of the risks incurred but of 60% of the returns.

The currency market is inefficient and was “the largest, most liquid” in the world with a daily volume of one trillion dollars, he said.

“Currency risks can be forecast statistically and exhibits low correlation to other asset class risks,” Bamber said during his presentation

“Performance has picked up of late after a poor start. The fund, however, is a long term investor,” Bamber told IPE and added it was still early days.

“If we as a pension fund can do it, many other pension funds can do it too providing they take appropriate advice, adopt the right approach and display a willingness to be a little less conventional,” he also said.

Asked whether Clwyd Pension fund recommended investment in currency funds he answered: “As I understand, quite a lot of pension funds are getting to current and funds of hedge funds.”

An internal consultant and an external independent advisor helped the pension fund in the review process, he also said.

Since April this year, Clwyd allocates a total of 56% in equities, 29% of which UK equities, and 12% in bonds.

Have your say

You must sign in to make a comment


Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2570

    Asset class: Direct Real Estate.
    Asset region: Europe excluding Switzerland.
    Size: 150m.
    Closing date: 2019-10-30.

Begin Your Search Here