--Rob McGlinchey
Forthcoming derivative legislation in the U.S. and the E.U. could force small hedge funds, pension funds and asset managers to limit or reduce their use of currency overlay services because those investors will likely face higher capital charges for bespoke derivatives and the costs associated with central clearing.
Currency overlay involves buysiders outsourcing the management of currency exposures, to hedge or generate returns. This frees up the buysider to focus on investment strategy in other areas.
One currency overlay manager in London said European pension funds, which are the biggest users of currency overlay services, might be forced to reduce their ....