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The Role of Currency in Institutional Portfolios

Edited By Momtchil Pojarliev and Richard M. Levich

Overview

In the current financial environment in which institutional investors are failing to achieve their goal of superior returns or beating the market, investors are rethinking asset allocation as a whole.


The potential role for currency in institutional portfolios has been much discussed, yet overlooked. Finally this market segment is coming to the foreground of the investment landscape. Editors and experts in the area of currency research, Momtchil Pojarliev (Fischer Francis Trees & Watts) and Richard Levich (New York University Stern School of Business), present contributions from authorities in the FX sphere of the investment world as well as the more traditional sectors, providing a balanced perspective to institutional portfolios.

Scheduled publication date: 23 Dec 2014

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Book description

The Role of Currency in Institutional Portfolios offers a comprehensive description of currency investing and will re-evaluate the potential role of currencies in institutional portfolios.

The empirical evidence suggests that institutional investors are persistently failing to achieve their goal of superior returns or “beating the market”. This book will focus on currencies, an overlooked market segment, and investigate the question of how currency investing could be part of the solution of achieving the required investment returns.

Chapters include:

  • Alternative Currency Hedging Strategies with Known Covariances: Wei Chen (State Street Associates), Mark Kritzman (Windham Capital Management) and David Turkington (State Street Associates)
  • The Carry Trade - Theory, Strategy and Risk Management: Mike Rosenberg (Bloomberg)
  • The Currency Investing Process: Managing G10 Currencies: Ulf J. Lindahl (A.G. Bisset Associates, LLC)
  • Currency Management Styles: Ten Years Later: James Binny (Lloyds Commercial Bank)
  • The Future of Currency Investing in Institutional Portfolios: Michael Melvin (BlackRock)

From passive currency management to currency overlay, the importance of currency management in different asset classes, and a comprehensive and sophisticated account of benchmarking currency strategies, The Role of Currency in Institutional Portfolios is a must-read for institutional investors, asset managers and hedge funds, investment banks and academics alike.

Book details

ISBN
9781782720942
Publish date
23 Dec 2014
Format
Paperback
Size
155mm x 235mm

Editor biography

Momtchil Pojarliev and Richard M. Levich

Momtchil Pojarliev

Momtchil is a Senior Portfolio Manager on the Currencies team at FFTW where he focuses on generating alpha for portfolios as well as contributing to the investment process, both in the judgment and quantitative styles.  Momtchil also contributes to the growth and development of FFTW’s currency alpha strategy as a stand-alone product. He joined FFTW in 2013 and is based in New York.  
Prior to joining FFTW, Momtchil was a director and senior portfolio manager at Hathersage Capital Management. Before that he was head of currencies for Hermes Fund Managers. Prior to Hermes he was a senior FX portfolio manager at Pictet Asset Management. Momtchil began his investment career at Invesco Asset Management, first as a senior economist and then as a senior FX portfolio manager.  He has 14 years of investment experience.

Momtchil has advised various asset management firms, including PIMCO and Goldman Sachs Asset Management, in the area of currency return analytics. He has published extensively in finance and investment journals. Most recently, Momtchil has co-authored the book A New Look at Currency Investing, published by the Research Foundation of CFA Institute. He is a member of The Economic Club of New York and the Swiss Society for Financial Market Research. He currently serves on the Editorial Board of the Financial Analysts Journal.

Momtchil holds an MSc in finance from Vienna University of Economics and Business Administration (1998) and a PhD in financial econometrics from University of Basel (2001).  He is a current CFA charterholder.

Richard M. Levich

Richard is Professor of Finance and International Business and Deputy Chair of the Department of Finance at New York University's Leonard N. Stern School of Business. He is also a Research Associate with the National Bureau of Economic Research in Cambridge, Massachusetts and a founding editor of the Journal of International Financial Management and Accounting.

Professor Levich has been a visiting faculty member at many distinguished universities in the United States and abroad including Yale University, the University of Chicago, Ecole des Hautes Etudes Commerciales (HEC) in France, the Australian Graduate School of Management of the University of New South Wales, and City University Business School (Cass) in London. He has published more than 75 articles on various topics dealing with international finance, and is the author or editor of sixteen books. His most recent book is A New Look at Currency Investing (with Momtchil Pojarliev) published in 2012 by the Research Foundation of the CFA Institute.

Professor Levich received his Ph.D. from the University of Chicago.

Table of contents

Foreword
Roger Gray (CIO at Universities Superannuation Scheme)

Chapter 1: Introduction
Momtchil Pojarliev (Fischer Francis Trees & Watts) and Richard Levich (New York University Stern School of Business)

Part 1 - Currency Exposure in Institutional Portfolios                     

Chapter 2: The Currency Conundrum: Regret vs. Optimal Hedging
Mark Anson (Acadia Investment Management)

Chapter 3: Global Asset Allocation and Optimal USD Hedging
Daniel Brehon (Deutsche Bank)

Chapter 4: Alternative Currency Hedging Strategies with Known Covariances
Wei Chen (State Street Associates), Mark Kritzman (Windham Capital Management) and David Turkington (State Street Associates)

Chapter 5: Strategic Asset Allocation and Currency Betas
Ross Kasarda and Steven Peterson (Virginia Retirement System)

Chapter 6: Separating Currency Returns from Asset Returns in Theory and Practice
Conscious Currency and Beyond: Ian Toner (Wurts & Associates)

Part 2 - Currency Investment Strategies                               

Chapter 7: Economic Data Surprises and Currency Alpha
Alessio de Longis and Eren Tufekci (Oppenheimer Funds)

Chapter 8: Is Trend Following in Foreign Exchange Markets Running Out of Fashion?
Pierre Lequeux (Independent Consultant)

Chapter 9: The Carry Trade - Theory, Strategy and Risk Management
Mike Rosenberg (Bloomberg)

Chapter 10: Carry Trades in Emerging Markets
John Bilson (Illinois Institute of Technology)

Chapter 11: Investing in Emerging Market Currencies: A Rewarded Risk
Javier Corominas (Record Currency Management) and Jonathan Scott

Part 3 - Currency Investment Process                    

Chapter 12: The Currency Investing Process: Managing G10 Currencies
Ulf Lindahl (A.G.Bisset)

Chapter 13: Systematic Currency Trading
Jolie de Miranda (Lynx Asset Management)

Chapter 14: A Discretionary Approach for Currency Investing
Adnan Akant (Fischer Francis Trees & Watts)

Chapter 15: Due Diligence as a Source of Alpha
Chris Schelling (Kentucky Retirement Systems)

Part 4 - Global Markets and the Future of Currency Investing                    

Chapter 16: Currency Forecasting: Generating Views about Foreign Exchange
Stephen Jen (SLJ Macro Partners)

Chapter 17: Exchange Rates, Risk Premia, and Inflation Indexed Bond Yields
Richard Clarida (Columbia University, NBER, and PIMCO) and Shaowen Luo (Columbia University)

Chapter 18: Currency Investing: A Risk Premium Approach
Aysu Secmen, Charles Wu and Pierre-Alexandre Noual (Citigroup)

Chapter 19: Currency Management Styles: Ten Years Later
James Binny (Lloyds Commercial Bank)

Chapter 20: The Future of Currency Investing in Institutional Portfolios
Michael Melvin (BlackRock)

Testimonials

“Currency risk management continues to fascinate and confound institutional investors.  One reason is that it hard to find a truly good reference book that explores all of the implications, benefits, and risks of currency hedging.  Finally, one book has brought together the best thinking on currency risk management, shedding light on both the strategic and tactical role of currency in an institutional portfolio.”
Mark Anson (President and Chief Investment Officer, Acadia Investments, Bass Family Office)

“Momtchil Pojarliev and Richard Levich, who partnered to write an excellent short book on currency investing in 2012, now present the collected writings of pretty much everybody who is anybody in the field. While many investors overlook currency as a risk factor and source of opportunity, it’s vitally important in a world where emerging countries represent an ever-bigger share of the market and the power of central banks continues to grow.”
Laurence B. Siegel (Gary P. Brinson Director of Research, CFA Institute Research Foundation)

“Investment professionals cannot afford to ignore this enlightening work on currencies.  Momtchil Pojarliev and Richard Levich have selected insightful content from various thought-leaders that enhances your chance of successfully managing institutional portfolios.”
Bud Haslett, CFA (Executive Director, CFA Institute Research Foundation)

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