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UK fund manager wins $2 billion FX mandate from Alaska fund

10/18/2017, 9:40:44 AMBasics of Trading
UK fund manager wins $2 billion FX mandate from Alaska fund

London-based currency manager Adrian Lee & Partners said on Tuesday the Alaska Permanent Fund Corporation had awarded it a mandate to manage $2 billion of international foreign exchange exposure.

The Alaska Fund, which manages roughly $62 billion in assets, posted a return of 2.05 percent as of Aug. 31, outperforming a target return 1.04 percent for the same period, according to its website.

Its long-term investment goal is to achieve an average real rate of return of 5 percent per year, the fund said.

The U.S. fund, however, was not available to comment.

In an interview with Reuters, Adrian Lee said mandates like that of Alaska's do not happen overnight, noting that it usually takes 18 months to get the deal done.

"It is not dependent on the short-term appetite for the dollar," Lee said.

The contract from Alaska pushed Adrian Lee & Partners' assets to $12.7 billion. Lee said the firm's assets have grown 35 percent over the last year.

"There is an expectation that the dollar is expected to rally more cyclically because of all the things coming out of the administration," Lee said, citing possible tax reform under U.S. President Donald Trump.

A strong dollar tends to deflate U.S. portfolio returns with international exposure because holdings of foreign assets are worth less when converted into the U.S. unit. U.S. pensions in general invest in stocks and bonds, both locally and internationally.

The international exposure has made them vulnerable to currency fluctuations, creating the need to hedge when the dollar is strong.  

"Certainly in 2014, people had huge losses (because of the strong dollar), they're trying to catch up and they don't want to be on the wrong side of that this time around," Lee said