Home / NAB’s timely quizzing of super funds on currency

NAB’s timely quizzing of super funds on currency

John Bennett
National Australia Bank is conducting its biennial foreign exchange survey of big super funds and other asset owners with a view to publishing the results in November. The bank, which offers passive hedging strategies for clients, couldn’t have picked a better time.
According to John Bennett, NAB’s general manager, Global FI Sales and Research, the survey, which commenced in 2000, has clearly established that most funds regard their currency decision as very important.
“The fact that the Australian dollar has fallen from a peak of US$1.05 to around the US$0.70c mark since the 2013 survey has been a significant factor in the outperformance or underperformance of funds,” he says.
“When asked about currency, the first thing people tend to look at is their asset allocation of domestic versus international assets. They will then look at what is an optimal level of currency hedging for each asset class and the fund.”
The survey is detailed, with NAB conducting face-to-face interviews with fund investment executives where possible.
“It will be really interesting to see what has changed this time around,” Bennett says. “I think all funds and their consultants will be keen to see the results this year.”
NAB is hopeful of having at least 60 participants, which represented approximately a$650 billion in total funds under management in the 2013 survey.
Most funds remember the last time the Australian dollar dropped sharply, in 2007 – from parity with the US to less than 50c. Some had to write out very large cheques – up to or more than $1 billion – to cover losses on FX hedges.
The 2013 survey identified that super funds had an average of 18.2 per cent of their portfolios exposed to currency movements and that 83 per cent ranked currency as an important issue for their fund.  Fifty per cent of the funds made strategic hedging decisions at the total portfolio level and 88 per cent said a change in the value of the Australian dollar might bring about a change in their hedge levels.
The survey is the only one of its kind which comprehensively examines how super funds manage their currency risk. It is now used as an aid to their decision making.
NAB will host a one-day conference in Melbourne on 11 November at which the results will be published and discussed. The bank will also follow up with one-on-one debriefing sessions if funds require.

Investor Strategy News




  • Print Article

    Related
    Why value is better at taking market beat-downs

    Value stocks are hit harder in market drawdowns but come out of them faster and harder, according to research from Pzena Investment Management.

    Lachlan Maddock | 1st Nov 2024 | More
    2024 US elections: Macro, geopolitical and investment perspectives

    US political shifts are set to shape market sentiment, with Amundi predicting significant moves in equities, emerging markets and inflation as tax and policy changes take effect.”.

    Staff Writer | 31st Oct 2024 | More
    Why one size super can’t fit all

    Single default balanced options still rule superannuation even as it becomes increasingly clear that every member needs an investment strategy that more closely matches their age and risk profile.

    Lachlan Maddock | 30th Oct 2024 | More
    Popular