Pensions Expert: Should UK pension schemes look to increase their foreign currency hedges?

Whilst defined benefit pension schemes are shown to have benefitted from the weakness of sterling since the Brexit referendum, it could be time for them to take profits. James Wood-Collins, CEO at Record Currency Management, says that it is very reasonable that pension fund trustees should now look to hedge, rather than try to predict the future path of the currency. Indeed, exposures to foreign currencies are not always a diversifier that is rewarded – hedging 50 per cent of them has historically provided substantial portfolio volatility reduction, whilst minimising costs. He cautions, however, that given the over-the-counter nature of the currency market and the relative lack of transparency, expertise is required to get the best prices.

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