Forex gets naturalized

While equities and fixed-income markets remain lukewarm, hedge-fund managers are turning in larger numbers to the foreign-exchange markets to boost returns. More than anything else, the advent of electronic FX trading has facilitated this interest, transforming what was for many an investment afterthought into a new source of alpha for the buy side. Stewart Eisenhart reports

Foreign-exchange (FX) trading, long treated mostly as a hedging mechanism by buy-side and hedge fund firms more ardently chasing returns in equities, fixed income and derivatives markets, has come into its own as managers seek new sources of alpha.

A confluence of several factors - notably the development of robust electronic trading capabilities and platforms, as well as the volatility of foreign exchange relative to equities - has drawn substantial interest from institutional and hedge-fund