Currency overlay is a financial trading strategy or method conducted by specialist firms who manage the currency exposures of large clients, typically institutions such as pension funds, endowments and corporate entities.wikipedia
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Record Currency Management
Currency overlay is a relatively new area of finance; the first institutional overlay mandate was awarded only in 1983 when the UK water Authorities Superannuation Fund awarded a contract to Record Currency Management.
He wrote the first textbook on the specialist topic of currency overlay, a business that now covers over US$100 billion of clients' assets.
foreign exchangeForexcurrency exchange
Individuals and institutions who own equities, government bonds, cash, or other assets denominated in foreign currencies are exposed to fluctuations in the foreign exchange market.
Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk.
The currency overlay manager will conduct foreign-exchange hedging on their behalf, selectively placing and removing hedges to achieve the objectives of the client.
These so-called 'pure alpha mandates' are set up to allow the manager as much scope as possible to take speculative positions.
hedge fundshedge fund managerhedge-fund
As such, they are similar in nature to foreign-exchange hedge funds in terms of objective and trading style.
UBS AGUBS Investment BankUBS Warburg
All WeatherBridgewater Associates LPBridgewater Business Analysis
The firm's history includes the pioneering of industry strategies such as: currency overlay, the separation of alpha and beta strategies, the creation of absolute return products, and risk parity.