Asian currency pays off

Active currency risk manager The Cambridge Strategy has reported positive returns for its Asian currency trading in October.

The UK-based asset management company said it produced strong results in a challenging month for the markets, and at a time when its Global Volatility Indicator has reached its “highest ever level”.

Cambridge chief executive Peter Henricks said its risk management system contributed positively to performance during the extreme market conditions.

“We remain very confident that risk will remain well controlled and risk-adjusted returns will remain high,” Henricks added.

Risk aversion was a key issue during the month, as well as liquidity. However, Henricks said their “risk budget is relatively low by historical standards and we remain confident that we are comfortably within our 24-hour liquidation policy guidelines, even in these adverse conditions”.

Henricks said “many longer-term positions had been closed out”, with short-term flows dominating market moves.

“We do not see current conditions improving dramatically, but towards the end of the month volatility did decline to more sensible levels,” Henricks said. “We believe the conditions are certainly in place for our funds and programs to continue to generate alpha, and for our negative correlation to many asset classes to continue to bring benefits for our investors.”

The key positions contributing positively were short the Korean won, Singapore dollar, Taiwan dollar and the Australian dollar. “We remain long the Japanese yen, which also produced positive returns for the month,” Henricks said.

Cambridge’s Asian Markets Alpha Program delivered a 2.44 per cent return, while the Asian Alpha Currency Fund returned 3.01 per cent and its Extended Markets Alpha Program returned 1.40 per cent.