Volatility making currency management 'critical' for super funds
Currency management has become a critical component of super returns, or lack thereof, as a result of the extreme currency swings in the global financial crisis, according to the latest NAB superannuation FX Survey.
The 2009 survey found that 85 per cent of respondents ranked currency management as an important or very important issue, compared to 74 per cent in 2007.
“This heightened awareness is a consequence of the cash impact of hedging hitting many portfolios with a vengeance over the course of 2008," according to NAB managing director of insurance and funds Donald Hellyer.
“Extreme currency movements have hastened the change in focus.”
Hellyer said access to liquidity to fund hedged positions when the Australian dollar moved dramatically was a paramount issue for many super funds, given the Australian dollar hit a high of 98 cents against the US dollar in July 2008 and a low of 60 cents in October 2008 — a variation of some 38 cents over a three-month period.
This volatility meant the currency contribution to the funds’ overall portfolio performance was “huge” in 2008.
For the MSCI ex-Australia index, the currency contribution to return unhedged would’ve been 22 per cent and 3 per cent fully hedged, Hellyer said.
Recommended for you
AFCA has revealed to Money Management the number of Dixon Advisory complaints it has closed so far out of the more than 2,700 total complaints received.
The Financial Advice Association Australia is launching a new brand awareness campaign that includes promoting the advice profession as an attractive option for career changers.
Half of financial advisers and wealth managers in Asia-Pacific plan to increase their clients’ exposure to private equity and multiprivate asset solutions, according to a survey by Schroders.
The former Iress chief executive has joined an NSW advice firm, Profile Financial Services, as an independent non-executive director.