Currency Absolute Return Strategy

Objective

Seeks an absolute return investment objective of LIBOR + 15% return per annum over a full market cycle (typically 3-5 years) with 30% annualized volatility.

Concept

An absolute return strategy that seeks return through dynamic currency management by taking long and short positions in currencies, independent of a client’s underlying asset allocation, investments, or benchmark restrictions. Implementation is through derivatives, and is leveraged such that a meaningful source of incremental return can be achieved without the need to draw much capital away from the client.

Investment philosophy

Opportunities arise when currencies deviate from intrinsic fair value.
Currency intrinsic value is expressed relative to other currencies (its exchange rate) is determined by its current prospective real relative purchasing power.
Discrepancies between market price and intrinsic value arise from market behavior and market structure providing opportunities to outperform.
A truly integrated global approach produces superior research.
Seeks to generate returns from the correction of significant discrepancies between price and fair value.

Investment process

Pure top-down currency management unbundled from asset allocation selection and bottom-up security selection.
Employs a fundamental price to intrinsic value investment process to 30 currencies.
Uses market behavior analysis to understand reasoning in the marketplace for prevailing levels of currency markets.
Actively manages risk with the objective of achieving returns that properly compensate for risk taken.

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