In the UK, at least, most of the investments sold as currency funds to the retail market tend to be money market products. The only foreign exchange risk investors will have is normally the product of placing money on deposit in an overseas currency.
That situation is about to change with the imminent launch of a range of FX funds in Europe under the Ucits III wrapper.
Ucits III allows asset managers to obtain what is frequently referred to as a European passport. This enables them to market their products across the region and also removes some of the onerous tax burdens they used to face in selling their funds to non-domestic customers. Ucits III has also created the opportunity to launch different products to traditional long-only equity or bond funds, such as those including derivatives.
The growing acceptance by institutions and corporations that any FX exposure they...
