What is currency overlay?

Currency overlay is used in international investment portfolios to separate the management of currency risk from the asset allocation and security selection decisions of the investor's money managers. Currency overlay is used by fund managers and large corporations to bring a strategic approach to their currency management.

Tuatara offers a full currency overlay service including advice and system solutions to managers of offshore assets to reduce risk and bring transparency to the impact of currency risk on their portfolios.

System solution - CNS

To undertake currency hedging  properly, clients must know, and continuously monitor, their investment positions and resulting currency exposures. Tuatara facilitates measuring currency risk within CNS, an online fx treasury system developed specifically for the New Zealand market.

The benefits of CNS:

• Enables compliance with policy - reports on each fund's specific policy parameters and highlights when changes to cover profiles are required
• Provides transparency - isolates the impact of currency movements on an offshore fund's performance.
• Guarantees integrity of data - a full database solution within a secure environment, driven by independent market rates
• Cost effective - CNS is a hosted solution requiring no additional hardware or infrastructural investment

CNS is a powerful tool for both trustees and fund managers to confidently manage currency hedging activity.

Advice

The manager of one of the largest pension funds in the world said: "On the basis of our experience  with currency overlay, the greatest benefit of currency hedging is the clarification of responsibility for risk."

In analysing a client's requirement, Tuatara will consider the following core factors:

•·                    What is the fund's appetite for currency risk?

•·                    What is the nature of the underlying risk?

•·                    In which currencies are the offshore risks held?

•·                    Which hedging instruments best suit the needs of the portfolio?

Tuatara apply benchmark methodologies in combination with each fund's unique investment strategy to create sound yet innovative overlay solutions.

Execution

With over 20 years experience in the currency markets, we are well positioned to provide a full range of execution services to satisfy the requirements of a robust currency overlay strategy. Hedging can be undertaken directly with Tuatara or we can provide an execution service with one of the many international banks we transact with.

Call Mike or Hils on 0800 100-301 (09 300-9500) or click here to arrange for a currency overlay specialist from Tuatara to contact you.