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.
- Distinct systematic approach
- Historically, has been a consistent source of stable alpha
- U.S. dollar neutral
- Highly liquid
- Uncorrelated to traditional and non-traditional assets
Investment ProcessCurrency 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
- 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 with buy and sell decisions determined by the model. Positions are adjusted when a currency’s ranking changes.
- Trading takes place at or around the London fixing