John Han­cock cur­rency fund sheds 8.7pc

The Pak Banker - - COMPANIES/BOSS -

SIN­GA­PORE: The mar­ket tur­moil sparked by the Swiss franc's record surge has turned the $1.9 bil­lion John Han­cock Ab­so­lute Re­turn Cur­rency Fund into the big­gest loser among U.S. peers.

The fund tum­bled 8.7 per­cent yes­ter­day, the steep­est drop on record and the most among more than 2,000 U.S.domi­ciled funds tracked by Bloomberg with at least $1 bil­lion un­der man­age­ment. The strat­egy is run by First Quad­rant, a $19 bil­lion in­vest­ment firm that also man­ages hedge funds. The fund had its sec­ond-big­gest short po­si­tion in the franc at the end of Novem­ber, ac­cord­ing to the lat­est fact sheet on John Han­cock's web­site.

Switzer­land's cur­rency surged as much as 41 per­cent against the euro yes­ter­day, roil­ing mar­kets world­wide after the Swiss Na­tional Bank's sur­prise decision to aban­don the franc's cap against the euro. FXCM Inc., the largest U.S. re­tail for­eign-ex­change bro­ker­age, said client losses on the swings threat­ened its com­pli­ance with cap­i­tal ra­tios while a New Zealand-based dealer went out of business.

"When they pulled the rug un­der the mar­ket, the Swiss franc ral­lied against ev­ery­thing," said Chris We­ston, chief mar­ket strate­gist at IG Mar­kets Ltd. in Mel­bourne. Many funds "would have been in a lot of pain last night," We­ston said. The John Han­cock fund is run by Dori Le­vanoni and Jeppe Ladekarl, part­ners at Pasadena, Cal­i­for­nia-based First Quad­rant. Ladekarl de­clined to com­ment. Yes­ter­day's drop brought the fund's loss dur­ing the past 12 months to about 6 per­cent, ac­cord­ing to data com­piled by Bloomberg. The fund was also bet­ting on the Ja­panese Yen and the U.S. Dol­lar, ac­cord­ing to the fact sheet.

First Quad­rant was started in 1988. The firm, which is owned by Af­fil­i­ated Man­agers Group Inc. in Bev­erly, Mas­sachusetts, over­sees funds that invest based on macroe­co­nomic themes, across cur­ren­cies and com­modi­ties.

Losses weren't re­stricted to the John Han­cock Fund. The $50 mil­lion AMG FQ Global Al­ter­na­tives Fund lost 8.3 per­cent yes­ter­day and 6.1 per­cent this month, ac­cord­ing to data com­piled by Bloomberg. Bets against the swiss franc were among the fund's largest cur­rency hold­ings at the end of Septem­ber, ac­cord­ing to a fund doc­u­ment.

In a fund com­men­tary at the end of the third quar­ter, the man­agers said they an­tic­i­pated price swings.

"We ex­pect that macroe­co­nomic and geopo­lit­i­cal chal­lenges will gen­er­ate more move­ments in ex­change rates and as­set prices." The SNB ended its three-year pol­icy of cap­ping the franc at 1.20 per euro a week be­fore the Euro­pean Cen­tral Bank meets to dis­cuss gov­ern­ment bond pur­chases to boost the euro-area econ­omy. Such a pol­icy, known as quan­ti­ta­tive eas­ing, could spur pres­sure on the franc to ap­pre­ci­ate against the euro.

The SNB spent bil­lions de­fend­ing the cur­rency cap after in­tro­duc­ing it in Septem­ber 2011.

Hedge funds and other large spec­u­la­tors raised bets that the dol­lar will rise ver­sus the franc to the most in more than 1 1/2 years on Jan. 6, data from the U.S. Com­mod­ity Fu­tures Trad­ing Com­mis­sion show. Wa­gers that ben­e­fit from dol­lar gains ver­sus the Swiss cur­rency ex­ceeded those that profit from a de­cline by 24,171 con­tracts on Jan. 6, the big­gest net long po­si­tion since June 4, 2013.

Swis­squote Group Hold­ings SA set aside 25 mil­lion francs ($28.5 mil­lion) fol­low­ing losses from the Swiss cur­rency shock. "Many clients were fol­low­ing the con­firmed long­stand­ing strat­egy from the SNB and were an­tic­i­pat­ing a weak­en­ing of the Swiss franc against the euro," Swis­squote said in its state­ment.

The drop "left the clients with a neg­a­tive bal­ance and has prompted the bank to ac­ti­vate a pro­vi­sion of 25 mil­lion francs."

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.