Active Currency Overlay programmes aim to transform existing currency exposures into a portfolio of currencies with an improved risk-adjusted return profile. They are often implemented in conjunction with passive currency hedging.

For example, an investor may passively hedge the majority of their existing currency exposures and redeploy part of the risk budget that has been saved into an Active Overlay strategy.

Active Overlay strategies may take into account various characteristics of the existing portfolio or they may be unconstrained, meaning that they can take positions in any currency pairs irrespective of their presence in the portfolio’s existing exposures.