Archive News (2015)


01/12/2015 IPE: New challenges for pension funds

Low interest rates and a strong Franc pose problems for Swiss institutional investors. Pension funds are being forced to change their investment philosophies and strategies following the Swiss National Bank’s decision to remove the cap on the value of the Swiss France in January which left Swiss overnight rates at around -0.7%. James Wood-Collins, CEO of Record, said that the SNB's move was caused a shock to both the Swiss financial system as well as FX markets more broadly.  

For the rest of this article, click here.

01/12/2015 IPE: FX market liquidity

Market liquidity is currently concerning asset managers and large financial institutions. While central banks have created trillions of euros since the financial crisis, the markets appear more prone to liquidity shocks than ever. James Wood-Collins, CEO of Record, commented that, the FX market had experienced multiple events where FX liquidity suddenly dried up and cited the Swiss National Bank’s removal of the cap on the value of the Franc as an example of this.

For the rest of this article, click here.  


20/11/2015 Euromoney: The Euro and risk

Recently, the euro has appeared to show signs of correlation with risk-off behaviour while the US dollar has gone in the opposite direction.  The reasoning behind this seems clear as, based on one-month interest rate differentials, the Euro is the third best funding currency amongst the G10 (after the Swiss franc and Swedish krona).  This means that as investors wind back their positions, they buy back euros, causing the currency to appreciate.  James Wood-Collins, CEO of Record, commented that if central bank policy continued to diverge then the Euro could be even more favoured as a funding currency. 

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16/11/2015 Financial Times: Currency hedging encouraged by strong dollar

The opportunities for investors in foreign exchange are increasing. The increasingly divergent monetary policies of central banks are creating conditions that are more supportive of carry trades and the recent appreciation of the US Dollar has also increased demand for currency hedging. James Wood-Collins, CEO of Record, agreed that deeper policy divergence would be more attractive for the carry trade.

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16/11/2015 Reuters: Investors look to hedge in volatile market

The return of large, unexpected moves in currency markets has encouraged investors to look to currency overlay strategies to protect the underlying returns on their overseas investments. James Wood-Collins, CEO of Record, said that the big events and spikes in the market made investors more aware of the impact currency volatility could have on their portofolios. He added that the market was changing with U.S. investors driving more of the growth than has historically been the case.

For the rest of this article, click here.


02/11/2015 Portfolio Institutional: Currency - The case for hedging

Currency risk has become an increasingly prominent challenge to institutional investors. This year has seen a significant increase in currency volatility and this has made the case for currency hedging stronger, especially for investors who aim to minimise the overall volatility of their portfolios. James Wood-Collins, CEO of Record Currency Management, said that increasingly divergent central bank policy was causing currency volatility to increase to its historical normal levels.  

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05/10/2015 Financial Times: The aftermath of the SNB decision

The Swiss National Bank’s decision to remove its currency cap has had a lasting effect on the country’s pensions market. The SNB simultaneously cut the deposit rate from -0.25% to -0.75% when it lifted the cap and this has raised issues for pension fund managers who are legally required to pay retirees an annuity equivalent to 6.8% of their savings. James Wood-Collins, CEO of Record Currency Management, stated that Swiss pension funds would be increasingly challenged to maintain high capitalisation rates in a negative interest rate environment. 

 For the rest of this article, click here.

24/09/2015 Funds Europe: Currency

While smart beta is well understood in the established asset classes of equity and fixed income, its applicability to the world of currency is less clear. Some of the opposition comes from those who consider there to be no currency beta, suggesting that one cannot simply hold currency to generate a return. However, factors, such as carry, value and momentum, can be very well suited to currency. James Wood-Collins, CEO of Record Currency Management, stated that developed market currencies move in cycles and that momentum can be exploited in these markets. 

For the rest of the article, click here.

17/09/2015 Financial Times: Optimists hope the worst is over for EM currencies

With emerging market (EM) currencies hitting record lows against the dollar day after day, some market participants are starting to see the end of the slump. While one of the drivers for the decline this year has been the anticipation of a Fed rate rise, undervaluation and sentiment indicate that the end could be in sight. However, James Wood-Collins, CEO of Record Currency Management, suggested that the extent of the decline may have been overplayed as the importance of interest rate differentials, the carry trade, in EM currency returns are often ignored. 

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12/09/2015 Wall Street Journal: Markets uncertain ahead of Fed decision

US stocks climbed in stark contrast to other markets as investors weighed whether the Federal Reserve would raise interest rates at their meeting next week. Concerns about the Chinese economy have also recently played on investors’ minds. Javier Corominas, Head of Economic Research at Record Currency Management, said that it was impossible to tell what markets would do ahead of the Fed meeting. 

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12/08/2015 Bloomberg: Momentum strategies lead the way in FX

July was a strong month for momentum trading as fears over Grexit eased and markets refocused on the theme of monetary policy divergence.  With the European Central Bank and Bank of Japan continuing with monetary stimulus and UK and US officials seeking to increase rates, the dollar and the pound have strengthened. James Wood-Collins, CEO of Record Currency Management, commented that the market was creating a more supportive environment for return-seeking strategies. 

For the rest of this article, click here.

03/08/2015 Thomson Reuters: FX transparency

In a Thomson Reuters feature on the changing face of the FX industry, James-Wood Collins discussed how liquidity provision in the FX market has evolved in recent years. He suggested that regulatory requirements have given traditional liquidity providers less of an ability to warehouse risk and that this was evident when the Swiss National Bank (SNB) removed the cap on the value of the Swiss Franc in January 2015. He also noted that even though alternative market makers were beginning to supply liquidity in certain FX markets, he expressed concerns that it would be harder to assess the creditworthiness of these counterparties than traditional liquidity providers.     

For the rest of this feature, click here.

27/07/2015 Euromoney: FX managers make the case for currency strategies

Foreign exchange managers see there being a growth in demand for both hedging and return seeking strategies as investors get more familiar with FX and the returns of strategies improve.  James Wood-Collins, CEO of Record Currency Management, noted that FX strategies have the unique ability to be run on an unfunded basis and this, combined with their uncorrelated returns and liquidity, makes them a fantastic investment opportunity.

For the rest of the article, click here.

22/07/2015 Financial Times: There is no reliable relationship between equity and currency

In a letter to the FT, James Wood-Collins, CEO of Record Currency Management, rejects the assertion that currency depreciation is more likely to lead to a rise than a fall in equity values. He argues that while equity markets tend to move in parallel with one another, currency markets are necessarily each other’s opposites. This means that, in general, currency exposure adds volatility to portfolios and hedging reduces it.

For the rest of the letter, click here.

16/07/2015 Financial Times: Currency hedging tends to reduce volatility

John Plender argued in a piece entitled “Currency hedging can be a very tricky business” (FTfm, 13th July 2015) that currency hedging needs to be considered pragmatically on a case-by-case basis. In a letter to the FT, James Wood-Collins, CEO of Record Currency Management, wholeheartedly agrees with this statement although he refutes the case that hedging results in marginally higher volatility over a typical equity holding period. Citing historic data, he argues that hedging would tend to increase volatility only if the equity return and the embedded currency return persistently and significantly negative correlation. While this may transiently be the case for euro-based investors, it is emphatically not the case for those in the US.

For the rest of the letter, click here.

09/07/2015 Handelsblatt: Grexit could cause EU chaos

Other countries within the Eurozone, notably Portugal and Italy, will be watching the situation in Greece very closely, as they too have high debt-to-GDP ratios and sluggish growth. The risks of contagion are, as yet, unclear although with unstable political set-ups in both countries, the suffering of the Greek people falls sharply into focus. It may be that this serves as a warning to other countries not to follow a similar path. James Wood-Collins, CEO of Record Currency Management, noted that there was potential for political contagion if Grexit occured. He further pointed out that Grexit would take the common currency into uncharted waters and suggested that mechanisms to hedge against the possibility of a country leaving the euro, such as redenomination swaps, may become reality.

For the rest of the article, click here.

03/07/2015 Bloomberg: Referendum shortens weekend for Asian FX traders

The Greek referendum on Sunday will mean a short weekend for foreign exchange traders who anticipate higher trading volumes and volatility in response to the outcome of the referendum. James Wood-Collins, CEO of Record Currency Management, said that previous votes over the last twelve months were aiding the firm’s response to the political turmoil in Greece.  He said that the firm was looking ahead and would avoid trading positions at the start of the week when the foreign exchange market could be volatile and illiquid as they did with the Scottish independence referendum. 

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02/07/2015 Financial Times: The Euro defies expectations

Amid a backdrop of the Greek crisis, the euro has shown surprising resilience, posting the second strongest quarterly performance against the US dollar for four years. The first three months of the year were characterised by short-euro strategies, but traders appear to be unwinding some of those positions. Nevertheless, the euro remains an attractive source of funding for carry strategies, given the low rates on offer. James Wood-Collins, CEO of Record observed that more divergent monetary policy environment should be supportive of carry strategies. 

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02/07/2015 Funds Europe: Currency management strategies

Currency volatility has picked up recently as increasingly divergent central bank monetary has weighted on FX market and this has made investors consider currency exposures in their portfolios more closely. In particular, the resurgence of the US Dollar, driven by the expectation of the Federal Reserve raising rates, has led investors to consider currency hedged products. James Wood-Collins, CEO of Record Currency Management, said that the firm had seen increased demand for its hedging and return-seeking products in response to the more volatile market conditions.  


29/06/2015 Financial Times: What happens if Greece leaves the Euro?

With euro zone discussions over a Greek bailout ending without a decision and Grexit looking increasingly likely, more thought is being given to the practicalities of Greece leaving the shared currency. While market infrastructure providers suggest that the code for a new currency could be implemented within one business day, numerous other issues including resolving long-dated financial contracts and the redenomination of euro notes could take a lot longer. James Wood-Collins, CEO of Record Currency Management, commented on protective measures that could be employed such as re-denomination swaps or legal tender contracts. He suggested that while such instruments have been discussed in recent years, Grexit may accelerate their development. 

For the rest of the article, click here.

26/06/2015 Reuters: A return to the drachma could aid Greece

While mainstream economic thinking may argue that Greece should remain in the euro zone, the support for Grexit and a return to the drachma is growing. While no legal route exists for Greece to leave the currency union, supporters argue that a debt deal will not stimulate Greek demand. However, a one-off devaluation of a new currency, possibly the drachma, would stimulate the Greek tourist industry and other service sectors. Neil Record, founder and chairman of Record Currency Management, argued that a return to the drachma could make Greece the best performing economy in Europe in 2016 and 2017.

For the rest of the article, click here.

02/06/2015 Euromoney: FX market liquidity

While the changes to the FX markets over the past few years have been gradual, they are contributing to a major transformation within the industry. With the buy side assuming more control, there has on occasion been patchy liquidity in a typically deeply liquid market. Following the removal of the currency floor by the Swiss National Bank, James Wood-Collins, CEO of Record Currency Management commented that liquidity providers may have less of an ability to warehouse risk as a result of regulation contributing to the volatlity around that period.

For the rest of the article, click here.

20/05/2015 International Financing Review: Europe reconsiders dual-sided reporting

European regulators are to reconsider rules that require both sides of a derivatives trade to report the trade, which would bring Europe more in line with the US. James Wood-Collins, chief executive officer at Record Currency Management, stated that Record's clients would welcome EMIR moving to one-sided reporting. The changes will be discussed as part of an EMIR review due to start at the end of May.

For the rest of the article, click here (subscription required).

20/05/2015 Wall Street Journal: The Euro bounces back

Many investors bet that the euro would fall over the last few months, with the currency seemingly headed for parity with the US dollar. However, in the space of a few weeks, the euro has surged back from its 12-year low of $1.0457 to a 10-week high of $1.1468. Some believe that there could be further gains in store. Javier Corominas, Head of FX Strategy at Record Currency Management, cargued that the risks to the euro are mainly political now

For the rest of the article, click here.

16/04/2015 Euromoney: NDF growth challenged by competition and liquidity concerns

While Non-deliverable Forwards (NDFs) have undergone significant growth over recent years, regulatory and liquidity concerns, as well as alternative FX products, have moderated their buy-side take-up. NDFs provide a solution to trading spot FX in emerging markets where currencies are not deliverable such as the Chinese renminbi. However, their trading has been weak recently following European proposals for the mandatory clearing of NDFs in October, while others are looking at alternative ways to hedge EM currency risk through the use of FX futures or swap indexes. However, James Rockall, director of trading at Record Currency Management stated that he did not see any other instrument competing well with NDFs.

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01/04/2015 Profit and Loss: Market participants generally support FX guidelines

The recently released guidelines for conduct, confidentiality and execution practices, approved by eight FX committees, have been well received. The document marks a useful move away from a merely regulatory environment to one where the marketplace shares the responsibility for their conduct. James Wood-Collins, CEO of Record Currency Management commented on this development and suggested that encouraging price-takers to earn best execution by understanding the market-maker’s position should remain a key part of the guidelines. 

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11/03/2015 Profit and Loss: Buy Side split on FX market practices

Buy-side firms’ responses to the Fair and Effective Market Review (FEMR) have revealed different opinions about the risk associated with internalisation and last look practices in foreign exchange markets. However, there was a general consensus that the benchmark reforms currently being undertaken would help to restore faith in fixed income, currencies and commodities (FICC) markets. Record Currency Management warned that attempts to artificially limit internalisation and last look practices could in fact widen bid-offer spreads and reduce liquidity.

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11/03/2015 Wall Street Journal: Central Banks retain influence over markets

The euro’s slide towards parity with the dollar and the recent fall in US stocks have demonstrated the influence of central banks in the global financial system. The US Federal Reserve looks set to raise rates enhancing the attractiveness of the dollar to investors, whilst the ECB has begun a program of Quantitative Easing (QE). This QE program has enticed overseas investors into Eurozone stock markets; however, this is having little effect on the Euro. Javier Corominas, Head of Economic Research at Record Currency Management, noted that upward pressure on the euro is being suppressed by foreign buyers hedging their currency exposure.

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05/03/2015 Euromoney: RMB depreciation provides new opportunities

The RMB is expected to fall back in line with global currencies as China gradually relaxes its grip on the FX regime, which could result in arbitrage opportunities for traders. China’s FX market has witnessed an accelerated expansion due to a combination of Chinese relaxation of its capital account, and a rise in offshore RMB trading. Javier Corominas, Head of Economic Research and FX strategy at Record Currency Management observed that the number of instituions being granted licences to make onshore investments has been rising leading to this notable increase.

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03/03/2015 IPE: Risk factor trading in currencies

Despite the fact that many believe that currency markets do not exhibit any betas, risk-factor investment has a long history in currencies. Smart Beta has been estalblished within the Foreign Exchange market for years, although it has rarely gone by that name. James Wood-Collins, CEO of Record Currency Management, believes that this is partly because means for evaluating relative performance within currencies is less evident than it is when compared to equities.

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27/02/2015 Reuters: Danish institutional investors place pressure on currency peg

Danish pension funds and insurance companies are increasingly hedging their exposure to a weakening Euro, placing upward pressure on the Danish crown and its peg against the euro. Speculators have been betting that Denmark could abandon its three-decade-old peg against the euro since the Swiss National Bank chose to abandon its peg on January 15th. James Wood-Collins, CEO of Record Currency Management, noted that Danish pension and insurance companies had felt the most direct effects of the Swiss currency cap breaking.  

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19/02/2015 Sovereign Wealth Centre: SWFs and currency turmoil

Swings in currencies have become a concern for investors, as demonstrated by the Swiss National Bank move to unpeg the franc from the euro. As a result, some institutional investors have faced declining portfolio value in dollar terms - even if the portfolio as a whole grew considerably. As a consequence of the strengthening dollar, the concept of hedging currency risk is becoming more attractive to institutional investors; such as Sovereign Wealth Funds. According to Record Currency Management CEO James Wood-Collins, hedging can reduce the impact of currency fluctuations whilst potentially reducing portfolio volatility.


13/02/2015 Euromoney: Danish Krone peg under pressure

In the aftermath of the Swiss National Bank's decision to abandon their CHF currency peg, traders have turned their attention to the other European G10 currency peg - the Danish krone, which has been pegged to the Euro for over 30 years. The Danish Central Bank has spent billions of krone defending the peg and boosting its balance sheet; however, speculative pressure on the currency has increased following the break of the Swiss peg. James Wood-Collins, CEO of Record Currency Management, commented on how the hedging outlook has changed following the SNB move, stating that some clients that are now re-evaluating which currency pairs to hedge. 

For the rest of this article, click here.

06/02/2015 Euromoney: EM returns often driven by funding currency

In spite of the ever-strengthening dollar and oil prices that have tumbled to record lows, tactical opportunities continue to exist within emerging market currencies. These opportunities, however, will be heavily dependent on how FX traders select their funding currency - and with economic consensus indicating a still strengthening dollar for 2015 (with a further weakening of the euro and yen); this should push traders into funding their purchases with non-dollar alternatives. James Wood-Collins, CEO of Record Currency Management, argued that EM FX offered an alternative to local EM currency debt indices.

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02/02/2015 European Pensions: Currency discussion

James Wood-Collins, CEO of Record Currency Management, recently sat down with a panel for European Pensions to discuss trends in currency markets. The panel discussed currency movements driven by macro and monetary factors; emerging market currencies and how dollar strength has affected them; the increased interest in passive hedging; and the current regulatory environment. James noted that the current environment is probably more favourable for currency strategies than it had been for some time and highlighted carry strategies as being one of the beneficiaries of an increasingly divergent monetary outlook.

23/01/2015 Pensions & Investments: ECB's bond-buying program surprises market

The ECB has confirmed that it will begin a €60bn program of public and private debt purchases, as part of its Quantitative Easing strategy. The size of the move, announced by ECB president Mario Draghi, surprised markets and is expected to prompt further Euro weakness. Javier Corominas, Head of Economic Research at Record Currency Management, stated that the most important part of the ECB's announcement was its open-ended commitment to keep the program running until the end of 2016.

For the rest of this article, click here.

23/01/2015 Wall Street Journal: Swiss Central Bank move causes market chaos

The Swiss National Bank recently shocked markets by scrapping their three year-old currency peg with the Euro. A few firms benefited from the SNB’s move to abandon the cap, whilst many others suffered heavy losses. James Wood-Collins, CEO of Record Currency Management, noted that the move had caused unprecedented trading environment and that uncertainty continued in the trading of the Swiss currency.

For the rest of this article, click here. 

20/01/2015 Pensions Age: Currency market commentary

Pension funds are increasingly diversifying across asset classes and this has led them to re-examine the role of currencies in their portfolios. Pension funds are using currencies, rather than equities and bonds, to implement their long term investment views. Record Currency Management CEO James Wood-Collins agrued that there has been increased interest in currency strategies from pension funds and attributed this to the prospect of divergent central bank policies and interest rates. 


07/01/2015 Wall Street Journal: Inflation hands Mario Draghi QE initiative

The Eurozone recently entered deflationary territory, with consumer prices last month 0.2% lower than they were in December 2013. Javier Corominas, Head of Economic Research at Record Currency Management, states his belief that current Eurozone weakness will provide Mario Draghi and the ECB with, "the ammunition they need to do QE".

For the rest of this article, click here.

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