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Active currency hedging strategy

 

For globally minded investors, foreign exchange (FX) risk is an unescapable truth. However, active currency hedging strategies can help to minimize that risk.

WHAT IS THE ACTIVE CURRENCY HEDGING STRATEGY?

The BNP Paribas Asset Management (BNPP AM) active currency hedging strategy is a fully customisable solution designed to protect a portfolio from losses related to foreign currency exposure.

Specifically, our team of FX specialists uses a portfolio overlay to actively manage the hedge ratios of the foreign currencies within a portfolio based on market views and conditions.

The strategy can help investors to:

  • Mitigate FX risk
  • Reduce volatility
  • Minimize drawdowns relative to passive approaches

OUR APPROACH TO ACTIVE HEDGING

Our approach to active currency hedging is made up of three pillars:

  1. First, we take a top-down view of the world, seeking to anticipate policy changes and capital flows that drive currency movements.
  2. We then combine these long-term views with rigorous bottom-up perspectives to determine a score for individual currencies; the score indicates the currencies direction and our conviction.
  3. Final positions and hedging sizes are implemented, based on the clients’ FX exposures and risk guidelines.

OUR CURRENCY MANAGEMENT EXPERTISE

Momtchil Pojarliev, PhD, CFA, leads our currency management team. Momtchil has over 17 years of investment experience, in which he has advised the likes of PIMCO and Goldman Sachs Asset Management on currency returns, and has been published in finance and investment journals. Two portfolio managers support Momtchil: Arnold Schlegel, CFA and Peter Vassallo, CFA. Between them, they have over 20 years of investment experience. The team also benefits from access to our macro research team and dedicated risk management group.

For more information, watch this interview with Momtchil Pojarliev or browse the resources below.

RESOURCES

Currency outlook

Trade wars, currency wars

Some like it hedged

The COVID-19 pandemic will have severe implications for the economy, but what about foreign exchange markets? We discuss.

Read more >

Recent events have created large amounts of volatile in markets, with few signs of respite. How can investors prepare?

Watch more >

Investors typically have three options for addressing FX exposures in their portfolios. We consider their pros and cons.

Read more >

 


DISCLOURES

BNP PARIBAS ASSET MANAGEMENT USA, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. These documents and video clips may also include information obtained from affiliated investment management companies within the BNPP Asset Management, the brand name of the BNP Paribas group’s asset management services. The documents and video clips are produced for informational purposes only and do not constitute: 1. an offer to buy nor a solicitation to sell, nor shall they form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. Any opinions included in these documents and video clips constitute the judgment of the author/ presenter at the time specified and may be subject to change without notice.

© 2020 BNP PARIBAS ASSET MANAGEMENT USA, Inc., All rights reserved.
BNP PARIBAS ASSET MANAGEMENT USA, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended.
These documents and video clips may also include information obtained from affiliated investment management companies within BNP Paribas Asset Management, the brand name of the BNP Paribas group’s asset management services. The documents and video clips are produced for informational purposes only and do not constitute: 1. an offer to buy nor a solicitation to sell, nor shall they form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. Any opinions included in these documents and video clips constitute the judgment of the author/ presenter at the time specified and may be subject to change without notice.