26 Oct 2010
SYZ & CO has announced the launch of OYSTER ForExtra Yield EUR, a new sub-fund of its OYSTER Funds SICAV. The sub-fund seeks to take advantage of the high interest rates paid by certain currencies. This strategy has been tested for two years before being made available in the form of a UCITS III fund. It avoids the main drawbacks of conventional Forex products and, owing to its very low correlation with traditional asset classes, is an excellent means of diversification. Each month its assets are invested via forward foreign-exchange contracts in the five currencies having the best risk/return ratio. Macro-economic filters developed by the Bank allow the downside risks to be limited in periods of market turbulence. Although it is still reserved for institutional clients, OYSTER ForExtra Yield EUR will shortly be registered in a number of European countries, including Switzerland, which will enable it to be accessible to the general public, like the other OYSTER sub-funds.
The strategy developed for OYSTER ForExtra Yield by Fabrizio Quirighetti, chief economist of Banque SYZ & CO, and Akimou Ossé, head of risk management for the Group, enables investors to avoid stumbling blocks, while benefiting from the high yields and structural progress of the emerging currencies. It consists of buying the selected currency through a forward contract then reselling it at the spot rate at maturity, a technique that allows the interest-rate differential with the fund’s reference currency (EUR) to be captured while limiting the counterparty risk.
The investment universe comprises all the currencies of the MSCI World and MSCI Emerging Markets indices, with the exception of some illiquid markets. In order to focus on the most worthwhile currencies, each month the managers select the five currencies having the best risk/return ratio, measured by the interest-rate differential with the euro, divided by the expected volatility. The fund’s assets are then invested with an equal weighting in these five currencies, via one-month forward foreign-exchange contracts or non-deliverable forwards for the currencies that are non-convertible or subject to restricted convertibility. The cash is invested in short-term deposits in the reference currency.
The result is a diversified portfolio that benefits from the UCITS III regulatory framework, is only weakly correlated with traditional asset classes, and is rebalanced systematically every month by means of a simple and transparent process without any leverage.
In October 2010 the five currencies selected were the Brazilian real, the Indian rupee, the Polish zloty, the South African rand and the Turkish lira.
The strategy developed for OYSTER ForExtra Yield by Fabrizio Quirighetti, chief economist of Banque SYZ & CO, and Akimou Ossé, head of risk management for the Group, enables investors to avoid stumbling blocks, while benefiting from the high yields and structural progress of the emerging currencies. It consists of buying the selected currency through a forward contract then reselling it at the spot rate at maturity, a technique that allows the interest-rate differential with the fund’s reference currency (EUR) to be captured while limiting the counterparty risk.
The investment universe comprises all the currencies of the MSCI World and MSCI Emerging Markets indices, with the exception of some illiquid markets. In order to focus on the most worthwhile currencies, each month the managers select the five currencies having the best risk/return ratio, measured by the interest-rate differential with the euro, divided by the expected volatility. The fund’s assets are then invested with an equal weighting in these five currencies, via one-month forward foreign-exchange contracts or non-deliverable forwards for the currencies that are non-convertible or subject to restricted convertibility. The cash is invested in short-term deposits in the reference currency.
The result is a diversified portfolio that benefits from the UCITS III regulatory framework, is only weakly correlated with traditional asset classes, and is rebalanced systematically every month by means of a simple and transparent process without any leverage.
In October 2010 the five currencies selected were the Brazilian real, the Indian rupee, the Polish zloty, the South African rand and the Turkish lira.
