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Barclays Launches Currency Overlay Desk

Barclays Capital launched a new currency overlay desk on 18 October, which provides treasury outsourcing services to the bank’s corporate and institutional clients. <?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Andy Winterton joined the bank in August from Bank One as director and head of the team, along with colleague Mark Thomas. At Bank One, Winterton was first vice president, European head of Strategic Risk Management Advisory (SRMA), with European responsibility for Banc One Currency Advisors. Thomas, who was an AVP in the SRMA group, joined Barclays as an associate director.

The launch of the currency overlay unit is a development that stems from what the bank has already been doing in other areas, by expanding the hedge management techniques on offer, says Winterton.

’In the past, currency overlay has been split between two camps ‘ those that follow technical models and the fund manager which looks at everything that is going on in the world ‘ ie, considers fundamentals and takes a position accordingly,’ he says.

’The bank’s activities in this space were previously mainly fundamental/judgement based on economists, charting and the views of our senior traders,’ Winterton adds. ‘The other part of the market is technical/model-based, which appeals to clients that have a pre-thought out strategy. We can do both, and are now offering it to customers to help them actively hedge and manage that hedge against adverse currency movements.’

Winterton adds that the bank’s fund management clients can now access one of the biggest index tracking companies, Barclays Global Investors, which offers its own currency overlay service. ‘We are working very closely with Barclays Global Investors to agree how we can differentiate our products to different parts of the market,’ says Winterton, adding that BGI focuses primarily on pension fund managers.

’We will differentiate ourselves by providing a diversification of approaches and a benchmark to create a diversified portfolio for our investors,’ says Winterton.

The new unit will enable clients to outsource their risk management to a larger bank, as well as help these customers understand how different exposures may impact their business in light of changing market conditions, says Winterton. ‘Clients must be comfortable with their positions throughout the year. This is a lengthy process, because we must understand what our customers’ needs are, and tailor our product offerings to meet these needs and achieve what they want from this service.’

’Currency overlay is an important part of the service that we offer our corporate and institutional clients,’ says Paul Thrush, global head of FX at Barclays Capital. ‘The commoditisation of FX markets, combined with their sheer scale of daily volume, makes it harder for companies to add shareholder value through creating their own risk management systems, technologies and processes. Outsourcing means that our clients can have the advantage of a leading foreign exchange bank’s security, expertise and technology, while reducing the need for creating and maintaining their own costly systems.’

The desk will trade FX spot, forwards and options in any tradable currency, and will be adding staff in the coming weeks.

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