Media Super, Sydney, appointed its first currency overlay manager to hedge its “significant” offshore exposures, said Jon Glass, chief investment officer of the A$2.5 billion (US$2.3 billion) fund.
The fund hired Tactical Global Management to passively manage currency exposure of its larger offshore investments, Mr. Glass said, “to look into relevant exposures and put in currency forwards as required.”
He declined to specify the range within which the hedge was set. An active overlay manager adjusts between zero and 100% of offshore exposures, whereas a passive or neutral hedge usually covers about 50% of these exposures.
The fund and its asset consultant, Frontier Investment Consulting, carried out stress tests to ensure it would have enough cash flow to maintain its currency forward contracts if the Australian dollar fell sharply.
Mr. Glass said the overlay would enable Media Super to “tailor currency requirements over time,” resulting in greater flexibility, and was a reflection of the fund's larger scale.
“We used to hedge by moving money between managers' products, but now we've got a currency overlay manager to implement a hedge.”
Simon Mumme is a reporter with Investment magazine in Sydney.