Applying "common wisdom" type of thinking in the process of financial forecasting can occasionally result in investment errors of grave importance. Such a conduct can translate at best in substantial opportunity costs or can at worst inflict serious financial losses.

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Currency Overlay Management

Because the numerous imbalances that still exist in the world's economy will inevitably be absorbed one day, currency trends will become increasingly important in the coming years and hedging against exchange rates risks is a must.

Through its Currency Overlay Program, Phincorp Capital Markets offers an extremely valuable asset management tool to institutional investors who manage assets and liabilities in multiple currencies. The purpose of the model is to identify certain primary and intermediate currency trends and participate in their direction until they give definite signs of reversal. The currency position is "laid over" the portfolio of investments, which ultimately translates into a lower degree of risk and increased profitability.

Currency overlay, which entails separating the management of the currency exposures that arise with cross border investments from the management of the underlying assets, has been shown to reduce risks while adding returns. Studies by pension consultants have found that currency overlay managers have added an average of 1% per year relative to their currency benchmarks since 1998. In today's environment of increasingly volatile foreign exchange markets, currency overlay is becoming a "must-have" for investors seeking superior performance.

Currency overlay typically focuses on actively placing and removing hedges - often several times a year. In passively hedged portfolios, the hedge is never removed; the result is that the investor is fully hedged at any one time but its gain or loss in the portfolio is perfectly mirrored (i.e. offset) by a corresponding loss or gain in the hedging account. In active overlays, however, the manager will place hedges whenever the market trends in a direction that is harmful to the investor's portfolio and removes the hedge to allow participation in trends that develop in directions that are beneficial to the investor's portfolio. In comparison with passive hedges, an active overlay clearly has the benefits of providing superior cash flows by offering protection while the market works its way against the investor and "ride" the gains when the market works for the investor. Thus, as the hedges are placed and removed, the overlay allows for a boost in the overall returns.

Your benefits at a glance:

• The returns in your portfolio of foreign investments are not distorted by potentially heavy losses that may arise due to adverse currency trends;
• The returns in your portfolio of foreign investments can be enhanced through a professionally managed active currency overlay program;
• Our Currency Overlay Program is based on a sound model of financial forecasting that stood the test of time for many decades;
• Comprehensive coverage in terms of currency pairs tracked on a regular basis;
• Superb return on investment profile