Gaining a perspective on currency hedge fund industry recent performance

Using three currency investment strategies - carry, trend and value - it is possible to apply the alpha beta separation framework to currency funds and allows the study of return drivers from currency

Investment theory today commonly separates the return of an investment into the contribution resulting from risk exposure (risk premium or beta) and one resulting from skill-based investing (outperformance or alpha).

This forms the academic basis for active and passive investing (indexing). Respectively, managers can be classified into beta grazers, whose returns can be tightly linked to risk factors and into alpha hunters, which exhibit no significant exposure to the risk factors¹.

While both