Although FX as an asset class still offers potential for returns, asset managers are increasingly reluctant to allocate funds towards trading strategies that are only focused on FX trading, said speakers at the annual Profit & Loss Forex Network New York event. On a panel session looking at allocation trends, the moderator observed that the speakers […]
Following on from Profit & Loss’ recent Forex Network New York event, Galen Stops gives picks out a few key themes from each panel session for discussion with Colin Lambert.On the trading side, they talk about whether there is such thing as “the wrong kind of volatility”, Stops says that panellist responses to a Brexit question perfectly sums up the confusion around recent political events in the UK and they question whether the industry has become so good at trading FX that it’s effectively killed market.Looking at trends around credit intermedation, Stops reveals that there is an emerging debate about whether more buy side firms will gravitate towards the FXPB or centrally cleared model and the pair discuss why it might be inevitable that market participants will pay more for PB services in the future.
Institutional allocators, wealth managers and family offices want the best performance possible from their portfolios, but what does “best” really mean for these firms? When they allocate towards hedge funds or other alternatives, are they looking for improved returns or for portfolio diversification? And what are the trends that will drive allocation decisions in 2019?These are amongst the key questions that will be addressed by a panel of seasoned allocators at the upcoming Profit & Loss New York conference on March 27.
Hedge funds have been much maligned post-financial crisis due a perceived lack of performance. Is this criticism fair? And what is the prognosis for currency funds in particular? Galen Stops takes a look.
Earlier this year, Cliff Asness, founder, managing principal and CIO of AQR, published an excellent piece explaining why hedge fund returns should not be compared to 100% long equities returns, as they so often are when people use the S&P 500 as a benchmark.
In the article, Asness was unequivocal in his conclusion that hedge funds not keeping up with equities during a nine-year bull market was completely predictable and is certainly not a reason to worry about the performance of these firms.
New research from Deutsche Bank shows that returns from FX macro managers have dropped to their lowest levels since the 1980s, despite the fact that “there does not appear to be a structural decline in the excess returns available to FX investors”.
The Deutsche Bank Currency Index (dbCR), which captures the beta available in the FX market by following a simple carry, valuation and momentum strategy, is at -2% for the year, but is well within historical ranges.
Hence the assessment from George Saravelos, an FX strategist at Deutsche and author of the research note, that despite low volatility and uncertainty around key macro issues there doesn’t appear to be a structural decrease in potential FX returns.