About one-third of U.S. tax-exempt institutional investors are actively managing the currency portion of their non-U.S. investments, according to a new survey by Goldman, Sachs & Co. and RogersCasey & Associates Inc.
New York-based Goldman, Sachs and RogersCasey, Darien, Conn., polled 66 large institutions that invest internationally. Those surveyed had an average 17.8% of their assets invested abroad.
Of the investors that manage their currency component, one-third use specialist external managers to handle the currency exposure of their equity allocations. Far fewer hire specialist managers to handle the currency exposure of their fixed-income portfolios.
The value-added potential of active currency management was the main factor for plan sponsors who chose active management - but risk reduction was almost as important.
Fifty-five percent of funds that actively manage currencies for international equities expect less than 20 basis points of added value from active management.
However, the expected value added from the active management of currencies in international bond portfolios is higher than for equity portfolios. Fully 33% of respondents expect between 51 and 100 basis points of added value from actively managed currencies in international bond portfolios; 41% expect less than 20 basis points of added value from active currency management in foreign bond portfolios.