Schroders will launch the Global Managed Currency fund on June 2, a long-only actively managed vehicle to be managed by Clive Dennis, who joined the firm from Morgan Stanley.
The Luxembourg-domiciled fund will be benchmarked against a global money market index designed for Schroders by JP Morgan, which contains 33 currencies weighted by GDP.
Christopher Wyke, the currencies product manager at Schroders, says that for people who are today holding money in deposits, who are nervous about the equity markets but facing very low yields, this is the lowest-risk way of putting your toe back into the water. The risk level is similar to bonds, he adds.
Wyke describes the fund as a plain vanilla long-only fund which is not looking to be a currency overlay, nor is it a currency hedge fund. There are very few funds like this that exist, he says.
The key strategy will be investment in emerging market currencies. Wyke says: Our view is that over the next five years 70% of the worlds growth will come from emerging market countries. In the US and UK there are structural problems, but the problems in Asia are cyclical. One of the purest ways to invest in these markets is through currency.
The team backs the Chinese renmimbi and also likes the Korean won, Malaysian ringgit and Taiwan dollar. In developed markets they expect to see slight appreciation of the euro and sterling against the dollar.
The fund will have daily liquidity and will also make shorter-term plays on heightened volatility in the currency markets, which Wyke says is set to last for 10 years. It can hold up to 50 currencies but is likely to hold about 20 at any given time, Wyke says.
Dennis was most recently executive director of foreign exchange at Morgan Stanley and has 25 years experience in the currency field, including asset management and brokerage, Schroders says. He will report to Geoff Blanning, the head of commodities, emerging market debt and currencies. Schroders is assembling a team to run the fund, which is likely to include one or two new external hirings.
Investors can buy dollar, euro or sterling share classes and the minimum investment is $1,000, 1,000 or 1,000. The benchmark index contains one-third Asian currencies, one-third from the Americas and one-third from Europe.