- Millennium Global’s Enhanced FX Carry strategy offers a highly liquid currency strategy that seeks to provide attractive total returns via the capture of renewed positive interest rate differentials available across G10 currencies.
- Academic literature is clear that the FX Carry trade has had statistically and economically significant positive excess returns in the majority of the history of floating exchange rates up until the Global Financial Crisis (‘GFC’).
- The post-GFC era was characterised by interest rate repression, excessive liquidity provision and the elimination of the FX Cary opportunity set via the adoption of unconventional monetary policy globally. This period was an aberration in economic and financial history and has now drawn to a close.
- We have now embarked upon a new regime in global markets involving a sharp rise in interest rates and a widening of yield differentials resulting in a renewed attractive investment environment for the “FX Carry” factor.
- In G10 FX, passive approaches involve mechanically buying the highest yielding currencies and selling the lowest yielding currencies.
- The disadvantage of this passive approach is that it takes no account of the potential to adjust exposure weightings to improve returns nor addresses the risk of infrequent but large losses.
- The Enhanced FX Carry approach includes refinements with the aim of improving both the risk and return characteristics of the strategy.
- Return Enhancement: Adjusting FX Carry currency weights using signals from our proprietary quantitative models
- Drawdown mitigation: Use of a “FX volatility switch” to reduce carry exposure during high volatility regimes.
Listen to the Podcast
The investment environment has dramatically changed as the post-GFC and Covid-19 era is over. The new investment regime comes with renewed opportunities in exploiting FX Carry and there are strong reasons why this environment is likely to persist. In this podcast, Millennium Global's Mark Astley and Abby Cushing take a closer look.
Download the fact sheet
Millennium Global's currency strategy is designed to take advantage of the recent positive interest rate differentials across G10 countries. Our team has built a unique process that seeks to maximise returns whilst minimising drawdowns. This fact sheet contains all you need to know about our approach.
Download the presentation
Our Enhanced FX Carry seeks to improve the return and risk profile of a passive FX Carry approach. This presentation outlines the rationale for FX Carry and Millennium Global's offering.