Currency asset managers slogging through a tough year


FX Concepts bankrupt, Parker Global Currency Managers Index down 5% YTD

Recent slump in volumes on the institutional front might just have a solid fundamental explanation. Two words – poor performance. The Wall Street Journal has reported yesterday that FX markets participants might be willing to forget 2013 as the market has proven too difficult to predict even for renowned experts.

According to Parker Global Currency Managers Index that is tracking performance in the FX funds management the average year-to-date return has been -4.71%. The head of currencies at London based Insight Investment Paul Lambert, has been one of the better performers with 3.5% growth this year, however when compared to stock market returns these gains are meager at best.

He stated that solid trend developments in the start of the year (referring to Japanese Yen again) have faded in the second part and caused a difficult year for many funds.

Once a behemoth on the FX management scene, FX Concepts closed its doors last month and its chairman John Taylor has stated that trend following is dead because trends never really get going. If one looks at historical volatility figures (excepting the Japanese Yen, which has been a stellar underperformer for the past year) they do indeed look quite subdued.

The central banks and the political sphere have started to have way too much influence on the currency front and some long term managers are finding it difficult to operate in the current environment. The Federal Reserve has added to frustration and confusion with the cancellation of widely expected “Septaper”.

On a positive note, that might be something that doesn’t bother retail traders too much as they keep pouring volumes into the FX markets. The increasing influence from governments and central banks might be even helping retail traders react better to ongoing economic developments. We all know that in this business everybody is king for a day, and let’s not forget that periods of low volatility are always followed by implosion in the same figures.

Frustrations aside, while institutional volumes are declining, retail traders maintain their curiosity and willingness to invest in the FX markets. ICAP’s EBS volumes were not stellar yesterday and close to multiyear lows marked in October. On the balance, most of the retail industry players figures remain in positive territory year-on-year.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report. 

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Currency asset managers slogging through a tough year

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