Swiss pension fund seeks FX hedging currency provider for CHF1.7bn

A Swiss public pension fund has issued a tender notice via IPE Quest for a CHF1.7bn (€1.7bn) FX hedging additional currency overlay mandate.

The hedging of the main currency (i.e. USD/EUR/GBP vs. CHF) is done by the pension fund’s in-house asset management team, using the same applications and infrastructure as for the external additional currency mandate.

According to search QN-2875, the following tasks are to be performed:

• FX hedging additional currency;
• FinfraG reporting of all the fund’s FX exposure (including the trades done by the in-house team) to a FINMA compliant trade repository;
• generation of Swift reports on all of the scheme’s FX trades for the attention of its global custodian bank;
• provide “contingency-back-up” processes for the current in-house FX hedging team (will be addressed in detail at short list stage).

The scheme is currently using FXall as a trading platform, trading on behalf of its FX-Prime-Broker HSBC which provides centralised clearing facilities across all deals of the scheme (main and additional currency).

Additionally, JP Morgan acts as global custodian and Bank of New York Mellon oversees the collateral process.

The manager of the additional currency mandate is expected to use the same infrastructure, most notably the FXall trading platform and HSBC as prime broker.

The notice also stated that the minimum assets under management (AUM) required for this asset class is CHF20bn.

As a currency manager manages only the impact of foreign exchange and not the underlying assets, therefore its AUM are notional rather than tangible, the notice stated.

The maximum expected level of tracking error for this mandate on a passive/passive enhanced basis is 0.20% p.a. The tracking error is not expected to exceed 20 bps per annum subject to market conditions, it added.

Interested managers have until 13 March to participate. The pension fund is looking to start implementation from September.

The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain further information contact IPE Quest directly.

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