Wealth & Finance April 2017

Wealth & Finance International 34 Strategy for Success acro Currency Group is an in-house boutique of Principal Global Investors. As an autonomous business unit, and a specialist provider of macro currency investment and hedging solutions, the firm’s currency management strategy, whose track record spans from 1997, is tailored to investor require- ments and includes both leveraged and unleveraged absolute return strategies as well as benchmark-oriented strategic currency overlay. As of March 31, 2017, Macro Currency manages $4,320 million across 14 accounts which is split across funds, segregated mandates and managed accounts. Ivan Petej, PhD, is Managing Director, Portfolio Manager and Head of Quantitative Strategy at Macro Currency Group. He goes into more detail about the work that the group specialises in. “We believe that financial markets evolve and develop over time,” he begins. “Effective investing in global markets requires an early iden- tification of these changes, followed by a deep understanding of their significance, and then for these insights to be overlaid with traditional economic cycle and policy analysis. We are above all, fundamental in- vestors and our investment returns are primarily generated through the early identification of global macroeconomic and investment themes. This is done through a combination of both proprietary tools which are used to identify the strategic investment environment and the use of analytical techniques to identify themes consistent with the evolving economic and asset market environment and policy framework.” “Over time, our investment philosophy has remained consistent, as has our investment process. However, so as to ensure we retain our analyti- cal edge we have developed a number of new tools that have helped us navigate new paradigms as the markets have evolved, at the same time bolstering our risk management and risk monitoring capabilities.” The firm’s most recent development involved the launch of a novel strategy called Global Time Diversified which is based on the belief that, in order to unlock a consistent return stream regardless of prevailing market conditions, there needs to be diversification across a number of differing time horizons. “The aim is to allow investors the opportunity to access a true source of consistent liquid alternative alpha in one single solution,” explains Ivan. “It does so by combining two distinct yet complimentary currency strategies, one discretionary and one systematic allowing for diversifica- tion across investment time horizon as well as style. The discretionary approach seeks to identify and exploit fundamental macroeconomic themes that influence exchange rates over a two to six month time horizon. The systematic approach is strategically focused with a long term, 12 month investment time horizon and is relatively unique. By identifying and creating currency exposures to key risk factors with long term explanatory powers, investors are able to access global growth returns from the currency market, using a method that goes beyond a simple carry or risk premia concepts.” “Our Global Time Diversified (GTD) track record to date demonstrates our ability to provide consistent return streams while at the same time managing to maintain a low correlation to other currency managers and traditional asset classes. The philosophy works as we believe it captures multiple opportunities of capturing alpha within the currency space in a dynamic and adaptable way through its discretionary component while simultaneously generating an additional return stream through its systematic component relating to global growth. Such an alpha/beta split is, to our knowledge, unique within the FX investment industry and is one of the key reasons it remains uncorrelated while being robust to a wide range of market environments, as its return stream demonstrates. We believe that such a strategy is highly adaptable, does not rely on certain market conditions or relationships and can be successful across multiple market cycles.” Since going live with the strategy in 2011, the Macro Currency Group has raised more than $800 million and continues to generate interest from investors. It also recently launched a separate UCITS Fund for the same strategy which at present time has $50 million within it. The Macro Currency Group consists of nine investment professionals and two non-investment team members. The firm utilises a team-based approach and all members are involved in the investment process. “Our idea generation has both formal and informal elements given the collegiate nature of the discussion and analysis process,” states Ivan. “We conduct both long-term and short-term research. Our long-term research is cantered on our annual offsite where we set the strategic direction for the group and the portfolios. All members of the team contribute to this with the effort being led by the senior team members. This is supplemented with research throughout the year conducted by strategists and portfolio managers based in our London office. We hold weekly strategy meetings where we have a formalized process to look over and discuss macroeconomic data, recent pricing in financial mar- kets and new investment opportunities. This weekly discussion is then continued with ongoing dialogue throughout the week. This ensures a continuous flow of information and active idea generation.” The Macro Currency Group has been managing tailored currency mandates to the unique needs of its clients for more than 17 years. We caught up with MD Ivan Petej who told us more about the firm and its areas of specialism. M 1704WF32