Currency management

A sophisticated liquid-alternative strategy for diversified, long-term performance

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 and has proven to be robust and diversifying. It has also resulted in attractive long-term performance across many different macroeconomic and geopolitical environments, meeting the challenges of many varieties of market risk.

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 offers 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.
  • Standalone returns of a skilled group of active currency managers, including CIBC Asset Management, have been significantly positive over an extended period.
  • 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, 150 KB) Opens a new window in your browser. 

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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

  • 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..