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:
- First, we take a top-down view of the world, seeking to anticipate policy changes and capital flows that drive currency movements.
- 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.
- 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.
Trade wars, currency wars
Some like it hedged
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