Currency management solutions

Currency management

Our Multi-Asset and Currency Management Team has managed active currency strategies since 2002. During this time, we’ve maintained the same broad investment philosophy while strategically evolving our investment process. Our process integrates rigorous quantitative models with top-down macroeconomic fundamental judgment that aims to provide diversified, long-term performance across many different macroeconomic and geopolitical environments.

Our philosophy emphasizes the importance of market inefficiencies and anomalies when determining the behaviour of currency returns. Despite high market liquidity, these inefficiencies and anomalies exist and are expected to persist. This reflects the presence of heterogeneous participants, including some with non-profit objectives and the influence of behavioural traits and investment horizons in the currency market.

Why consider active currency investing?

Active currency is a liquid alternative investment strategy that seeks to provide a diversifying source of expected return to investment portfolios:

It can be implemented as a capital-efficient unfunded strategy with no upfront requirement to allocate portfolio risk capital or in a fully-funded commingled vehicle.
Active currency returns are diversifying to traditional and other alternative asset classes.
Active currency is appropriate for both defined benefit and defined contribution investment plans.

Learn more about our Multi-Asset and Currency Management Team (PDF, 495 KB) Opens a new window.

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Our currency management capabilities

Absolute return – Pure active

An unconstrained absolute return strategy
Opportunity to add value is more significant than with constrained overlays
Adds a diversifying source of return to portfolios
Typically implemented in a standalone risk sleeve
Benchmark is typically cash interest rate

Active hedging (constrained)

Active hedging

A constrained overlay strategy
Allocates a small risk budget to active currency management
Objective is to generate an additional source of return additive to underlying portfolio
Benchmark is often underlying portfolio exposures, but can also be cash interest rate

Passive hedging

Hedges a constant proportion of currency exposure inherited from international investments
Objective is often to mitigate the portfolio risk contribution of this currency exposure.
There is no associated positive long-term expected return

To learn more about our currency management strategies, contact us at institutional@cibc.comOpens your email app..

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