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Active Currency Management Potential Benefits

March 7, 2018 | Multi-Asset

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Active currency management provides global investors a source of opportunity and significant diversification, says Thomas Clarke, partner and portfolio manager on the William Blair Dynamic Allocation Strategies team. Currently, he's finding attractive opportunities in emerging-market currencies.

Watch the video or read the recap below.


Active currency management is important for global investors for two reasons. One is that it's the least well-managed risk in international investing, generally. And second, it's actually a source of opportunity that is the most unappreciated.

The benefits of using an active currency-management approach in an international portfolio are twofold.

One is that it works. Exchange rates to tend to revert to fundamental value quite well over time Therefore, you have exploitable opportunities.

Second reason is that currencies tend to be not correlated with assets. They go in different directions; they respond differently to fundamental and non-fundamental influences. So actively managing the currency actually adds substantial diversification to a global portfolio.

Where we're focused at the moment is that we find some of the more attractive opportunities around emerging-market currencies today. So in our portfolio strategy we have long exposure to a number of emerging currencies, such as the Mexican peso, the Philippine peso, Chinese yuan, and we are short unattractive currencies, which we find to be in the developed world—currencies like the U.S. dollar, the Australian dollar, and the Swiss franc.