Latest news with #TomWestbrook
Yahoo
13-05-2025
- Business
- Yahoo
Analysis-Australia's pension funds start questioning US strategies
By Tom Westbrook and Stella Qiu SINGAPORE/SYDNEY (Reuters) -Funds in Australia's A$4.2 trillion ($2.7 trillion) pension sector are rethinking some of their long-held strategies of buying U.S. assets and the dollar, as confidence in American growth wanes. Volatility around Sino-U.S. trade tensions this year has forced investors to reassess their U.S. exposure and the role of the dollar, which has lately failed to behave as a safe haven currency amid heightened uncertainty around Washington's economic policy. While there have not yet been any major shifts in strategy, currency dealing desks in Australia have noticed modest changes in hedging demand from some pension funds. Those hedging tweaks are under the spotlight globally and Australia's pension funds, known locally as superannuation funds, have long kept low FX hedging ratios on large and growing foreign stock portfolios. When U.S. equities fell, funds allowed hedging ratios to rise by not keeping their currency positions exactly in step with asset prices, said Troy Fraser, head of foreign exchange sales for Australia and New Zealand at Citi in Sydney. "You would expect the funds to be selling Aussie and buying U.S. to adjust or to rebalance their hedge ratio," he said. "We've seen a little bit of that, but not a lot. I think funds are generally happy to be longer Aussie." Fraser said funds were weighing their asset mix, hedging costs and the outright level of the Aussie. Were it to extend it could move the currency, and in separate research Citi in February estimated that a 5% shift in hedging now could push the Australian dollar as much as 11% higher against the greenback. At about $0.64, it's been falling on the dollar for nearly 15 years since touching $1.10 in 2011. Along with a tendency to drop reliably whenever global stocks fell, cushioning losses in Aussie dollar terms, the Aussie's behaviour encouraged a low hedging ratio. Industry-wide hedging on foreign equities was roughly 22% in the December quarter, according to the most recent regulatory data. "Unhedged has worked," said Ben McCaw, a senior portfolio manager at MLC Asset Management. "It was lowering the volatility of the portfolio (and) providing a positive return to the portfolio ... so that was almost the ultimate asset," he said. Now, however, long- and short-term factors are starting to shift how the Australian currency trades. He has been reducing U.S. dollar currency exposure for about three years. Others are keeping a watching brief. CBUS, which manages more than A$100 billion, has kept currency exposure steady but the U.S. dollar, which fell through market turbulence in April, caught the attention of fund CIO Leigh Gavin. "The USD is probably one of the few asset classes that hasn't rebounded from the early April lows, and we think that's interesting," he said. "It's certainly something we're monitoring, but it's still pretty early days." 'QUESTIONING OUR EXPOSURE' Some fund chiefs say U.S. allocations are under review. Australian super funds run a high allocation to equities, by global standards, at nearly 60%, according to regulatory data, with roughly half that abroad, as of December 2024. According to Westpac, some A$555 billion is invested in U.S. stocks by Australian domiciled investors. "That's been a very good place to be investing over the last couple of years," said John Pearce, chief investment officer of A$139 billion fund UniSuper on the fund's podcast in April. "Like every other fund, we are questioning our exposure to the U.S. It would be fair to say that we've hit peak exposure and will be reducing over time," he said. To be sure, no increase in the fund's hedging ratio, which typically swings between 30-40%, is being considered, a UniSuper spokesperson said in emailed remarks to Reuters. And there are very big funds that are not budging in their strategies. "We have no view of changing our hedge position or any of our positions based on that event," said Michael Clavin, head of income and markets at Aware Super, referring to last month's tariff-driven drawdown and market volatility. The chief investment officer of AustralianSuper, the largest super fund with more than A$365 billion under management, also told the Financial Times last month it would continue investing more than half its offshore flows into the U.S. Still, the Aussie's 3% rise against the U.S. dollar this year has meant the year-to-date 0.6% drop in the S&P 500 translates to a near 3.5% fall in Australian dollar terms, which if it persists or extends could start to drive a response. "Being underweight the Aussie dollar has been something which has typically rewarded Australian investors," said Cameron Systermans, head of multi-asset in the Asia-Pacific at fund manager and adviser Mercer. "So if there were to be a durable uptrend in the Aussie dollar, that would be a bit of a pain trade, I think, for a lot of the asset owners in Australia. And it might force them to really reassess whether that still makes sense." ($1 = 1.5625 Australian dollars) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
Analysis-Australia's pension funds start questioning US strategies
By Tom Westbrook and Stella Qiu SINGAPORE/SYDNEY (Reuters) -Funds in Australia's A$4.2 trillion ($2.7 trillion) pension sector are rethinking some of their long-held strategies of buying U.S. assets and the dollar, as confidence in American growth wanes. Volatility around Sino-U.S. trade tensions this year has forced investors to reassess their U.S. exposure and the role of the dollar, which has lately failed to behave as a safe haven currency amid heightened uncertainty around Washington's economic policy. While there have not yet been any major shifts in strategy, currency dealing desks in Australia have noticed modest changes in hedging demand from some pension funds. Those hedging tweaks are under the spotlight globally and Australia's pension funds, known locally as superannuation funds, have long kept low FX hedging ratios on large and growing foreign stock portfolios. When U.S. equities fell, funds allowed hedging ratios to rise by not keeping their currency positions exactly in step with asset prices, said Troy Fraser, head of foreign exchange sales for Australia and New Zealand at Citi in Sydney. "You would expect the funds to be selling Aussie and buying U.S. to adjust or to rebalance their hedge ratio," he said. "We've seen a little bit of that, but not a lot. I think funds are generally happy to be longer Aussie." Fraser said funds were weighing their asset mix, hedging costs and the outright level of the Aussie. Were it to extend it could move the currency, and in separate research Citi in February estimated that a 5% shift in hedging now could push the Australian dollar as much as 11% higher against the greenback. At about $0.64, it's been falling on the dollar for nearly 15 years since touching $1.10 in 2011. Along with a tendency to drop reliably whenever global stocks fell, cushioning losses in Aussie dollar terms, the Aussie's behaviour encouraged a low hedging ratio. Industry-wide hedging on foreign equities was roughly 22% in the December quarter, according to the most recent regulatory data. "Unhedged has worked," said Ben McCaw, a senior portfolio manager at MLC Asset Management. "It was lowering the volatility of the portfolio (and) providing a positive return to the portfolio ... so that was almost the ultimate asset," he said. Now, however, long- and short-term factors are starting to shift how the Australian currency trades. He has been reducing U.S. dollar currency exposure for about three years. Others are keeping a watching brief. CBUS, which manages more than A$100 billion, has kept currency exposure steady but the U.S. dollar, which fell through market turbulence in April, caught the attention of fund CIO Leigh Gavin. "The USD is probably one of the few asset classes that hasn't rebounded from the early April lows, and we think that's interesting," he said. "It's certainly something we're monitoring, but it's still pretty early days." 'QUESTIONING OUR EXPOSURE' Some fund chiefs say U.S. allocations are under review. Australian super funds run a high allocation to equities, by global standards, at nearly 60%, according to regulatory data, with roughly half that abroad, as of December 2024. According to Westpac, some A$555 billion is invested in U.S. stocks by Australian domiciled investors. "That's been a very good place to be investing over the last couple of years," said John Pearce, chief investment officer of A$139 billion fund UniSuper on the fund's podcast in April. "Like every other fund, we are questioning our exposure to the U.S. It would be fair to say that we've hit peak exposure and will be reducing over time," he said. To be sure, no increase in the fund's hedging ratio, which typically swings between 30-40%, is being considered, a UniSuper spokesperson said in emailed remarks to Reuters. And there are very big funds that are not budging in their strategies. "We have no view of changing our hedge position or any of our positions based on that event," said Michael Clavin, head of income and markets at Aware Super, referring to last month's tariff-driven drawdown and market volatility. The chief investment officer of AustralianSuper, the largest super fund with more than A$365 billion under management, also told the Financial Times last month it would continue investing more than half its offshore flows into the U.S. Still, the Aussie's 3% rise against the U.S. dollar this year has meant the year-to-date 0.6% drop in the S&P 500 translates to a near 3.5% fall in Australian dollar terms, which if it persists or extends could start to drive a response. "Being underweight the Aussie dollar has been something which has typically rewarded Australian investors," said Cameron Systermans, head of multi-asset in the Asia-Pacific at fund manager and adviser Mercer. "So if there were to be a durable uptrend in the Aussie dollar, that would be a bit of a pain trade, I think, for a lot of the asset owners in Australia. And it might force them to really reassess whether that still makes sense." ($1 = 1.5625 Australian dollars)
Yahoo
13-05-2025
- Business
- Yahoo
Analysis-Australia's pension funds start questioning US strategies
By Tom Westbrook and Stella Qiu SINGAPORE/SYDNEY (Reuters) -Funds in Australia's A$4.2 trillion ($2.7 trillion) pension sector are rethinking some of their long-held strategies of buying U.S. assets and the dollar, as confidence in American growth wanes. Volatility around Sino-U.S. trade tensions this year has forced investors to reassess their U.S. exposure and the role of the dollar, which has lately failed to behave as a safe haven currency amid heightened uncertainty around Washington's economic policy. While there have not yet been any major shifts in strategy, currency dealing desks in Australia have noticed modest changes in hedging demand from some pension funds. Those hedging tweaks are under the spotlight globally and Australia's pension funds, known locally as superannuation funds, have long kept low FX hedging ratios on large and growing foreign stock portfolios. When U.S. equities fell, funds allowed hedging ratios to rise by not keeping their currency positions exactly in step with asset prices, said Troy Fraser, head of foreign exchange sales for Australia and New Zealand at Citi in Sydney. "You would expect the funds to be selling Aussie and buying U.S. to adjust or to rebalance their hedge ratio," he said. "We've seen a little bit of that, but not a lot. I think funds are generally happy to be longer Aussie." Fraser said funds were weighing their asset mix, hedging costs and the outright level of the Aussie. Were it to extend it could move the currency, and in separate research Citi in February estimated that a 5% shift in hedging now could push the Australian dollar as much as 11% higher against the greenback. At about $0.64, it's been falling on the dollar for nearly 15 years since touching $1.10 in 2011. Along with a tendency to drop reliably whenever global stocks fell, cushioning losses in Aussie dollar terms, the Aussie's behaviour encouraged a low hedging ratio. Industry-wide hedging on foreign equities was roughly 22% in the December quarter, according to the most recent regulatory data. "Unhedged has worked," said Ben McCaw, a senior portfolio manager at MLC Asset Management. "It was lowering the volatility of the portfolio (and) providing a positive return to the portfolio ... so that was almost the ultimate asset," he said. Now, however, long- and short-term factors are starting to shift how the Australian currency trades. He has been reducing U.S. dollar currency exposure for about three years. Others are keeping a watching brief. CBUS, which manages more than A$100 billion, has kept currency exposure steady but the U.S. dollar, which fell through market turbulence in April, caught the attention of fund CIO Leigh Gavin. "The USD is probably one of the few asset classes that hasn't rebounded from the early April lows, and we think that's interesting," he said. "It's certainly something we're monitoring, but it's still pretty early days." 'QUESTIONING OUR EXPOSURE' Some fund chiefs say U.S. allocations are under review. Australian super funds run a high allocation to equities, by global standards, at nearly 60%, according to regulatory data, with roughly half that abroad, as of December 2024. According to Westpac, some A$555 billion is invested in U.S. stocks by Australian domiciled investors. "That's been a very good place to be investing over the last couple of years," said John Pearce, chief investment officer of A$139 billion fund UniSuper on the fund's podcast in April. "Like every other fund, we are questioning our exposure to the U.S. It would be fair to say that we've hit peak exposure and will be reducing over time," he said. To be sure, no increase in the fund's hedging ratio, which typically swings between 30-40%, is being considered, a UniSuper spokesperson said in emailed remarks to Reuters. And there are very big funds that are not budging in their strategies. "We have no view of changing our hedge position or any of our positions based on that event," said Michael Clavin, head of income and markets at Aware Super, referring to last month's tariff-driven drawdown and market volatility. The chief investment officer of AustralianSuper, the largest super fund with more than A$365 billion under management, also told the Financial Times last month it would continue investing more than half its offshore flows into the U.S. Still, the Aussie's 3% rise against the U.S. dollar this year has meant the year-to-date 0.6% drop in the S&P 500 translates to a near 3.5% fall in Australian dollar terms, which if it persists or extends could start to drive a response. "Being underweight the Aussie dollar has been something which has typically rewarded Australian investors," said Cameron Systermans, head of multi-asset in the Asia-Pacific at fund manager and adviser Mercer. "So if there were to be a durable uptrend in the Aussie dollar, that would be a bit of a pain trade, I think, for a lot of the asset owners in Australia. And it might force them to really reassess whether that still makes sense." ($1 = 1.5625 Australian dollars) Sign in to access your portfolio
Daily Maverick
07-05-2025
- Business
- Daily Maverick
Stocks rally on US-China talks, China rate cut
US-China to discuss trade in Switzerland China cuts interest rates, reserve requirements Hang Seng and U.S. futures jump; yuan slips By Tom Westbrook SINGAPORE, May 7 (Reuters) – US stock futures and Chinese markets rose on Wednesday, as investors cheered news of a meeting between top US and Chinese trade officials as a chance to tone down the tariffs, while China cut interest rates and vowed to support stock markets. 'My sense is this will be about de-escalation,' US Treasury Secretary Scott Bessent said of the meeting, scheduled for the weekend in Switzerland. S&P 500 futures rose about 0.9% and Hong Kong's Hang Seng was up 1.7% by mid-morning. China blue chips rose 0.5% and Japan's Nikkei was broadly flat. 'It suggests that there is perhaps a willingness and enthusiasm on both sides to meet at a high level, so it can't be anything but positive I would have thought,' said National Australia Bank's head of foreign exchange research Ray Attrill. 'It's ostensibly positive for Asian FX generally.' The dollar rose slightly on the yen and euro, while China's rate cuts weighed on the yuan and knocked the China-sensitive Australian dollar back below 65 US cents. South Korea's won, which had been rallying hard with a broad surge in Asian currencies, fell back by more than 1%. Gold fell 1.4% and oil was about 0.5% higher. China's central bank governor on Wednesday flagged a 10 basis point cut in its benchmark interest rate and a 50 basis point cut to bank reserve requirements – sending more cash into the banking system. Simultaneously the financial regulator announced an expanded scheme to send insurance investment into the stock market and promised more steps to support property markets, which investors took as a signal of authorities acting in concert. 'It's kind of reminiscent of the joint press conference starting the stimulus euphoria in September. So that's positive,' said Homin Lee, senior macro strategist at Lombard Odier in Singapore. The US Federal Reserve meets to set interest rates later on Wednesday, with expectations for cuts being dialled down. Markets imply nearly no chance of a move on Wednesday and only a 33% chance of a cut in June, down from 64% a month ago. The heaviest fighting in more than two decades has erupted between nuclear-armed neighbours India and Pakistan, with shelling and gunfire over the frontier in Kashmir and India striking targets inside Pakistan. 'It adds another layer to geopolitical tensions,' said NAB's Attrill, and would likely push down on India's rupee. The euro had support above $1.13 with German conservative leader Friedrich Merz elected chancellor in a second round of voting after his alliance with the Social Democrats was dealt a surprise defeat in the first attempt.
Yahoo
07-05-2025
- Business
- Yahoo
Stocks rally on US-China talks, China rate cut
By Tom Westbrook SINGAPORE (Reuters) -U.S. stock futures and Chinese markets rose on Wednesday, as investors cheered news of a meeting between top U.S. and Chinese trade officials as a chance to tone down the tariffs, while China cut interest rates and vowed to support stock markets. "My sense is this will be about de-escalation," U.S. Treasury Secretary Scott Bessent said of the meeting, scheduled for the weekend in Switzerland. S&P 500 futures rose about 0.9% and Hong Kong's Hang Seng was up 1.7% by mid-morning. China blue chips rose 0.5% and Japan's Nikkei was broadly flat. "It suggests that there is perhaps a willingness and enthusiasm on both sides to meet at a high level, so it can't be anything but positive I would have thought," said National Australia Bank's head of foreign exchange research Ray Attrill. "It's ostensibly positive for Asian FX generally." The dollar rose slightly on the yen and euro, while China's rate cuts weighed on the yuan and knocked the China-sensitive Australian dollar back below 65 U.S. cents. South Korea's won, which had been rallying hard with a broad surge in Asian currencies, fell back by more than 1%. Gold fell 1.4% and oil was about 0.5% higher. China's central bank governor on Wednesday flagged a 10 basis point cut in its benchmark interest rate and a 50 basis point cut to bank reserve requirements - sending more cash into the banking system. Simultaneously the financial regulator announced an expanded scheme to send insurance investment into the stock market and promised more steps to support property markets, which investors took as a signal of authorities acting in concert. "It's kind of reminiscent of the joint press conference starting the stimulus euphoria in September. So that's positive," said Homin Lee, senior macro strategist at Lombard Odier in Singapore. The U.S. Federal Reserve meets to set interest rates later on Wednesday, with expectations for cuts being dialled down. Markets imply nearly no chance of a move on Wednesday and only a 33% chance of a cut in June, down from 64% a month ago. The heaviest fighting in more than two decades has erupted between nuclear-armed neighbours India and Pakistan, with shelling and gunfire over the frontier in Kashmir and India striking targets inside Pakistan. "It adds another layer to geopolitical tensions," said NAB's Attrill, and would likely push down on India's rupee. The euro had support above $1.13 with German conservative leader Friedrich Merz elected chancellor in a second round of voting after his alliance with the Social Democrats was dealt a surprise defeat in the first attempt. (Reporting by Tom Westbrook; Editing by Shri Navaratnam and Jacqueline Wong)
