The completion last week of the merger between Bank of New York and Mellon Global Investments has resulted in a unique offering of a full range of currency management strategies, among other things, for the Australian market.

Combining BNY’s technical trend-following ‘BNY Overlay’ currency strategy with Mellon Capital’s fundamental or forecasting strategy and Pareto Partners’ risk management/hedging strategy gives investors the full suite of currency management under the one roof. Prior to the merger, which makes the group the 10th largest funds manager in the world, BNY had started to market several of its alternatives management subsidiaries in Australia. The most recent visitors were BNY Overlay specialists Kevin Bailey and Gary Vocat, both London-based managing directors of BNY Overlay Associates. The two were part of a team of four who set up the business for BNY in 1994. The team, still intact, were directors of one of the early currency specialists, Record Currency. BNY Overlay has about $A14 billion under management. Australian clients include QIC and HESTA. The manager offers primarily separate overlay accounts, in most cases representing alpha-generating long/short strategies. The firm was in the process of launching a currency fund, Vocat said, which would allow for the trading of emerging currencies. The fund would have about 20 currency ‘pairs’ eight of which were with emerging currencies and the rest between the $US and others. “We have a purist style,” he said. “It’s technical and trend following, which very few managers do… We think that clients are looking to blend, once again, the different styles of currency management.” Bailey said that overlays, rather than investing in a fund, provided several advantages, the main one being that the client did not need to fund the investment. “For a big institution, there’s no real reason why you would want to use a fund,” he said. However, some consultants, such as Intech in Australia, prefer funds for alpha strategy currency or global macro services because they believe it provides a better, more clearly defined limitation on the risk. Vocat said BNY had alpha guidelines, such as tracking error of active risk and maximum long or short positions.

Join the discussion