Consultancy & Research GmbH
JRC Berlin Overlay Management
For our institutional investors and industrial companies, we offer tailor-made solutions to safeguard their foreign investments in the form of an overlay management strategy.
We understand overlay management to be the collateralisation of foreign assets against currency fluctuations and the generation of risk-adjusted additional income.
The risk of currency fluctuations when investing, borrowing or trading abroad is often underestimated. Investing in foreign stocks can be very profitable. However, a devaluation of the local currency there can result in the profit in euros being significantly lower or even leading to losses. Another problem can occur with foreign currency debt.
Practical example and our solution for exchange rate fluctuations
A practical example from practice is the EURCHF. When the Swiss National Bank (SNB) decided on January 15, 2015 to remove the peg of the Swiss franc to the euro, this triggered turbulence in the markets. For companies that bought loans in Switzerland, this meant an additional debt of around 20 percent.
Our solution to the problem of exchange rate fluctuations in foreign assets is to use the trend movements in the foreign exchange markets to effectively control currency risks. The targeted establishment and reduction of hedges in the various currencies can minimize the risk of a loss in value when the euro rises, or generate additional profits when the euro falls.
The overlay management strategy can be implemented using derivatives or the spot market.
JRC Capital Management
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