Australian super funds look to cross-currency basis swaps
With an average unhedged currency exposure of 17% of assets under management, Australian superannuation funds face the risk of significant performance drag from global foreign exchange volatility. The cross-currency basis swap market, however, has created a potential opportunity to hedge this risk and profit at the same time
As Australia increases its ownership of offshore assets across global equities, real estate, infrastructure and other alternative asset classes, foreign exchange has become a major contributor to the investment returns of Australian pension funds. But according to the 2011 Superannuation FX Survey by National Australia Bank (NAB), which polled 49 of the country’s largest super funds with combined AUM of A$523 billion (US$560 billion) representing 79% of the market, forex volatility has hit the
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