Importance of foreign exchange

I want to begin this blog by firstly taking time to explain why foreign exchange is an important part of portfolio composition and why as investors you should be paying close attention to currency exposure, as it could be driving or eroding your investment returns.

When investing in most globally diversified portfolios investors need to consider not only the risk of the underlying investment, but also the risk of the investable currency. For example, when you invest in the S&P 500 Index as a GBP based investor you have to convert your GBP into USD. However, when looking to cash in the investment you will once again need to swap those USD back into your base currency of GBP. In doing so you have left yourself exposed to the currency moves throughout the period. If USD depreciates it will buy you less GBP, eating away at your total return.

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To combat these currency moves we began our currency overlay strategy in June of 2017, applying a blanket strategy to all of our ACUMEN portfolios by hedging all equity and fixed income USD and EUR underlying exposure via FX derivatives.

We did so to reduce risk relative to our currency hedged market composite benchmark and because we viewed GBP as deeply undervalued as depicted by purchasing power parity. As shown in the graph above, both hedges have done well insulating the ACUMEN portfolios from both EUR and USD depreciation against GBP in the long term.

Following our strategic review in 2020, we decided to move from a passive to an active currency management strategy, capitalizing on shorter-term tactical market opportunities highlighted by technical analysis and verified by fundamental reasoning. This decision came as we moved from the aforementioned market composite benchmark to IA sectors comprising funds that tend to leave the majority of their equity based currency exposure unhedged.

That said, given our market outlook at the time, we did not immediately adjust our exposure and instead opted to retain our existing currency hedges. This meant we participated in much of the earlier rally in GBP/USD to 1.42.

Following a technical pull-back, a shift in risk appetite and growing concerns over inflation and lofty equity valuations we decided to unwind 70% of our equity and commodity-linked USD currency exposure in August 2021 at around 1.37, whilst retaining our euro hedge. As our conviction in the trade grew and deteriorating risk appetite materialized we then decided to unwind an additional 15% USD exposure in early January at 1.36.

The result: over 4% appreciation in USD (GBP/USD currently at 1.30) and further EUR hedge gains translating to improved fund performance that goes straight to the investors’ bottom line. This goes to show the importance of active management, especially in recent volatile times.

Head of Trading - FX & ETFs
Alex is responsible for the ETF trading and FX strategy at Titan Asset Management and has executed over £5 billion of trades during his prior 4 years at Tavistock Wealth.

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Paul Hunt

CEO

Paul Hunt is a proven business leader and entrepreneur with over 30 years’ experience and track record of scaling businesses across multiple sectors. Hunt is highly experienced in business turnarounds, strategic planning and creating a positive people culture geared for success.

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David Chandler

Portfolio Assistant

David is responsible for providing operational support to the fund managers. David has passed the CFA UK IMC and graduated in 2018 with a degree in Economics and Business Management from the University of Sheffield.

James Peel, CFA

Portfolio Manager – ESG

James is a Portfolio Manager at Titan Asset Management and is responsible for Titan’s approach to sustainable investing. He previously worked as a researcher at the British Chamber of Commerce in Taipei. James graduated in 2018 from the University of St Andrews, where he studied economics. He is a CFA charter holder and has passed the CFA UK Investment Management Certificate (IMC), the CFA UK Certificate in ESG Investing, and the CFA UK Certificate in Climate and Investing (CCI).

Jonah Levy, CFA

Portfolio Manager – Physicals

When not collecting various minerals and mining memorabilia, Jonah can be found managing the physical allocations at Titan Asset Management. Prior to Titan he worked at Tavistock Wealth for 3 years, having previously gained experience in Holland at an oil brokerage, and in London at an energy trading house. Jonah is a CFA charter holder, having graduated from St. Andrews University with an MA in Management and Economics.

Alex Livingstone, CFA

Head of Trading – FX & ETFs

Alex is responsible for the ETF trading and FX strategy at Titan Asset Management and has executed over £5 billion of trades during his prior 4 years at Tavistock Wealth. Alex also assists in the wider portfolio management of the CIP specialising in technical analysis and risk management. He is a CFA charter holder and holds an BSc in Retailing, Marketing and Management from Loughborough University.

Sekar Indran, CFA

Senior Portfolio Manager – Equities

Sekar is responsible for managing the team’s equity investments. He helped expand the investment proposition over five years at Tavistock Wealth and continues this role at Titan Asset Management. Sekar has prior financial services experience at Barclays and Allianz. He is a CFA charter holder and holds a BSc degree in Industrial Economics from the University of Nottingham.

John Leiper, MSc, CFA, FDP, CFTe

Chief Investment Officer

John Leiper is the Chief Investment Officer of Titan Asset Management and carries direct responsibility for all investments in the Centralised Investment Proposition (CIP) at the firm. John has 15 years’ experience in financial markets having previously worked in a variety of roles at RBS, Morgan Stanley, Credit Suisse and Tavistock Wealth. John Leiper is a CFA and FDP charter holder and a member of the Society of Technical Analysts. He holds a BSc degree in Economics from Warwick University and an MSc degree in Economic History from the London School of Economics.

Matthew Cureton

Co-Founder

Matthew has been an intrinsic part of Haibun (now Titan Alternatives) since its formation. As a Co-Founder, he has focused on developing relationships with clients, providers, and companies seeking funding.

Matthew’s personal involvement with the fund-raising activities at Titan Alternatives starts at the very beginning of each journey.

Incorporating the due diligence process, meeting with the various management teams, and visiting companies on site, to then being involved with the marketing documents, hosting presentations, and facilitating the investments for clients. Matthew also continues to monitor and report on the investment throughout its life, which has included him taking on Non-Executive Directorships or observer roles on various company boards.