This insight presents a short overview of 2 case studies that applies our intelligence.
European Family Office
Portfolio in EUR
We work with this family office since 2014. They run a large equity allocation with heavy exposure to the US market and therefore a significant EURUSD risk.
Instead of completely hedging out their USD risk, which was their standard approach before, they asked us to design a dynamic FX management approach.
The final strategy was implemented in April 2014 and is based on the models of a New York based systematic hedge fund manager, who runs highly interesting currency models. As a result the family office was able to capture more than 80% of the upside of the USD (back in April 2014 the EURUSD was trading around 1.38). In other words: instead of missing the complete currency upside, the client generated an additional around 18% on his USD equity exposure by not statically hedging the currency.
US University Endowment
Portfolio in USD
For a US University Endowment Fund we had to solve a different problem. They want to increase their equity allocation without taking the full downside risk. They approached us with this idea last year and we discussed efficient ways to implement such an “upside participation” strategy. After investigating several options, we concluded that a diversified approach with two conceptually different models provided by different managers would work well to meet their goal. The solution is highly innovative and has been presented at an endowment conference in 2016 and is currently fully implemented.