FX to the Fore: Risk & Return in a Post Crisis Era

The 2009 FX Roundtable
March 24, 2009

Participants

• COLIN CROWNOVER, Head of Currency Management, State Street
• JOHN MURRAY, Vice President, FX Fund Services (Sales), BNY Mellon
• MOMTCHIL POJARLIEV, Head of Currencies, Hermes
• THANOS PAPASAVVAS, Head of Currency Management, Investec Asset Management
• BOB NOYEN, Chief Investment Officer, Record Currency Management
• THOMAS KRESSIN, Senior Vice President, Portfolio Management, PIMCO

Excerpt

Momtchil Pojarliev: "The past 20 months were very good for currencies as an alpha class. I'm saying an alpha class and not an asset class because, from my perspective, it doesn't matter if investors think currencies are an asset class or not. What matters is if they believe in your alpha generating capabilities in the foreign exchange market. Last year we saw a lot of black swans in the currency market. We saw five or six sigma type events, and the currency market had more black swans than any other. Moreover, covered interest parity, which is a fundamental arbitrage relation in international finance, broke down. The forward rates were pricing something completely different than the spot and interest rates; a lot of amazing things happened and this creates opportunity. Now investors realise that currency risk is huge and could impact their performance in other assets. For example, sterling based investors who invested in the Japanese stock market last year would have been flat because sterling depreciated so much against the yen that offset all the losses from the Japanese equities. On the other hand, Japanese based investors would have had huge losses. We are still in an exceptionally good environment for risk takers, which is good for investors and they should use it."