US public pension fund places currency manager ‘on watch’ after poor returns
Ohio Police and Fire pension fund (OP&F) has placed Mellon Capital Management on watch because of the unsatisfactory performance of its active currency mandate, according to an OP&F spokesman.
OP&F hired Mellon Capital in 2007 to manage a $191 million active currency portfolio. However, following disappointing returns, the currency manager’s performance will now be subject to quarterly review, according to the pension fund’s spokesman, David Graham. Annualized returns over the past three years have been 2.4%, with an annual average return of minus 1.72% since inception. OP&F says the long-run target for average annual returns is 4%.
OP&F operates a 1-4 rating system for fund manager performance, with 1 indicating overall satisfaction, and 4 giving confirmation of termination. Mellon has been placed on 3, resulting in performance reviews every quarter.
Mellon’s active currency strategy is a fundamentals-based valuation approach, and the firm implements its strategy in the OTC currency forwards market. The strategy invests only in G10 currencies.
Founded in 1983, Mellon Capital manages $240 billion in assets across 1,900 different accounts. The firm invests in currencies, global equity, fixed income and commodities and has nearly 500 clients.