Overlay Management

For our institutional investors and industrial companies, we offer an overlay management strategy in the form of tailored solutions to hedge their foreign investments.

We understand overlay management as the collateralization of foreign assets against currency fluctuations as well as the generation of a risk-adjusted excess returns.

The risk of currency fluctuations in investments, debt or with trades abroad is often underestimated. An investment in foreign stocks can be quite profitable. However, a depreciation of the foreign currency can result in a significantly lower gain in your domestic currency or even result in losses. Another problem can occur when in debt in a foreign currency.

Practical example and our solution for exchange rate fluctuations

A practical example from practice is the EURCHF. On 15 January 2015 the Swiss National Bank (SNB) decided to cancel the peg of the Swiss franc against the euro which sparked a turmoil on the markets. Companies that hold loans in Switzerland had an additional debt of about 20 percent.

Our solution to the problem of exchange rate fluctuations on foreign assets is to use the trend movements in the currency markets to effectively manage foreign exchange risks. This is done by selective buildup and reduction of a hedge position in different currencies so that the risk of loss in value with an appreciation of the Euro can be minimized and a depreciation of the Euro can create an excess return.

The implementation of an overlay management strategy can be made via derivatives or on the spot market.