Risk Management Overlay: Passive Plus
Mesirow Currency Management provides investors a customized solution to manage unrewarded currency risk in their international portfolios.
For institutional investors
As an independent currency specialist, Mesirow Currency Management (MCM) has been delivering innovative, customized currency solutions to institutional clients globally since 1990.1 Being a private, employee owned firm, Mesirow is free from many conflicts of interest associated with bank-affiliated organizations or publicly held firms and is fully aligned with the interests of its clients.
Passive Plus risk overlay
Passive Plus currency hedging is an effective way to insulate an international portfolio from currency fluctuations and an efficient way to hedge long-term currency movements.
Why consider?
Returns generated by leaving currency exposure unhedged can vary significantly and can add or detract from performance. Passive plus currency hedging gives our clients an opportunity to manage unrewarded currency risk, capitalize on over/under valuation, reduce currency volatility, and control cash flows.
Passive Plus illustration of signal generation
Source: Mesirow. Past performance is not necessarily indicative of future results; actual outcomes may materially differ.
Strategic partnership
As a pure agent, our business is aligned with clients’ interests to form long-term strategic partnerships. Rather than focusing on providing standardized products, MCM develops custom solutions through our deep experience with global institutional clients.
Efficiently hedge long-term currency movements; insulate the portfolio from fluctuations
Target return* | 25–40 basis points p.a. through infrequent adjustments to client's hedge ratio
Risk* | 50–80 basis points tracking error (typical mandate)
Time horizon | Long-term solution, infrequently reset hedge ratio
Exposure | Each client’s currency exposure is unique in terms of currency, size, frequency of changes in the underlying investment, and operational constraints. Each area is taken into consideration and a structure is implemented to maximize hedge program efficiency.
Methodology | Varies from client to client based on their portfolio, MCM builds the operational framework to be the most accurate and efficient and to accommodate the client's needs.
Reporting | Customized reporting packages are produced to ensure clients receive the most comprehensive information available to evaluate the program’s performance and ensure complete transparency.
Experience | Our trading team averages 20+ years experience and is fully staffed on a 24-hour basis throughout the global trading day.
Systems | MCM's core proprietary software and market leading external systems allow us to serve as agent for our client base across a broad roster of global counterparty institutions.
Counterparties | Competitive counterparty selection process, rigorous attention to all aspects of transaction pricing, and transparent execution reporting. This best-in-class approach ensures execution effectiveness that incorporates a bid/offer spread and time stamp approach and translates directly into transparent value for our clients.
An effective program will expertly balance operational mandate requirements with a thoughtful, strategic approach to achieve a client’s specific risk management objectives. MCM has built the necessary IT and Systems infrastructure to properly manage the most complex currency management mandates, and we continue to develop and invest significant resources to ensure it remains best in class.
Explore other risk management overlays
1. Track record for Currency Risk Management Overlay strategies prior to May 2004, the date that the Currency Risk Management team joined Mesirow, occurred at prior firms. Track record for Currency Alpha and Macro strategies prior to October 1, 2018, the date that the Currency Alpha and Macro Strategies team joined Mesirow, occurred at prior firms.
*Actual returns may materially differ from the target returns. Actual tracking error or volatility may materially differ from the targets set forth herein. Risks and offering terms vary materially by product. Nothing contained herein constitutes an offer to sell interest in any Mesirow investment vehicle. Please refer to the disclaimer page here.