SYZ rolls out high-yield currencies UCITS

Each month, the managers select five currencies with the best risk/return ratios and then invest the fund’s assets on an equal weighting basis. One-month forward FOREX contracts or non-deliverable forwards (NDFs) are bought before being sold at the spot rate at maturity and invested in short-term deposits in the chosen currency. This allows the fund to capture the interest rate differential relative to the reference currency (EUR) whilst limiting counterparty risk: typically, most hedge funds use substantial leverage to achieve profits in the carry trade but with this comes substantial volatility and risk. The strategy employed in the ForExtra Yield EUR Fund was developed by Fabrizio Quirighetti (pictured), SYZ & CO’s Chief Economist, and Akimou Ossé, Head of Risk Management for the bank. To limit the risk of devaluation in high-yield currencies the fund uses proprietary macro-economic filters. Currencies selected for October included the Brazilian real, the Indian rupee, the South African rand, the Polish zloty and the Turkish lira. “High yielding currencies not only pay an "emotional" premium that more than offsets their historical devaluation risk but there is even a case to be made for their appreciation relative to major currencies, as their fundamentals appear much sounder in terms of growth, current accounts and public debt,” Akimou Osse, Co-Fund Manager, told Hedgeweek via email. “Our target return is 8 per cent per year.”