The investment approach employs a tactical currency allocation model that seeks to achieve the investment objective by taking advantage of opportunities in the currency markets through holding long positions in markets with high relative return prospects, while simultaneously holding short positions in markets with below average expected returns.
The model is best described as both research driven or ‘fundamental' and quantitative. It is based on common sense (fundamental) drivers of currency returns, and aims to add value exploiting inefficiencies created mainly by market participants with different utility functions. A multifactor model combines a variety of factors, such as valuation, macro economic and flow factors, in generating an overall attractiveness ranking for each currency.
Quantitative techniques are used to test each factor, to combine them in a proprietary investment model, and for the daily implementation process. The fund takes positions in the most liquid currencies; USD, CAD, EUR, CHF, GBP, SEK, JPY, AUD, NZD using currency forwards. Cash available in the fund is invested in money market instruments with high credit ratings.