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A U.S. dollar neutral, systematic approach to currency selection using G10 currencies. Fundamental and technical inputs feed a proprietary model, which seeks to achieve a positive absolute return in excess of the return on cash.

Investment Approach

The Currency Alpha strategy is a systematic trading strategy based on a proprietary, quantitative currency selection model. The model incorporates both fundamental and technical inputs and the strategy focuses on nine developed country currencies. Forward currency contracts are used to implement long and short positions. The targeted return is 200 – 300 basis points above U.S. T-bills.

Distinguishing Features

  • U.S. dollar neutral
  • Uncorrelated to traditional and non-traditional assets
  • Distinct systematic approach
  • Consistent source of stable alpha

Investment Process

Currency selection model
  • Proprietary, multi-factor model identifies attractive and unattractive currency opportunities on a weekly basis
  • Model focuses on factors that can be measured on a real-time basis, to avoid problems interpreting heavily lagged and frequently revised economic data
  • Input factors are generally uncorrelated with each other
  • Currencies are ranked on each factor and then ranked overall
Systematic currency trading strategy
  • Based on ranking, the strategy uses forward currency contracts to go long the three most attractive currencies (against the U.S. dollar) and short the three least attractive currencies (against the U.S. Dollar)
  • Model is run weekly.
  • Buy and sell decisions based on the output of the quantitative currency selection process. Long and short positions adjusted when a currency’s ranking changes in our model.
  • Trading takes place at or around the London fixing.