The National Association of Pension Funds (NAPF) has published a guide to help pension funds better understand foreign exchange and how to cope with its risks.
Many pension funds hold investments outside the UK, particularly in Europe, the United States and the far East. These can provide higher returns, but can also present currency risks that need to be handled carefully.
The guide, Foreign Exchange (FX) made simple, provides information on the basics of the currency market, currency strategies, and draws attention to the risks of foreign exchange and how they can be managed.
David McCourt, senior policy adviser at the NAPF, said: “International investments can help provide better returns and greater diversification. They can, however, entail significant risks for pension funds.
“Pension funds need to be aware that what may look a good return in a foreign currency might not be the case when converted back into sterling.
“Our guide offers clear and concise information on foreign exchange and how pension funds can better manage currency risks.”
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