FTSE Launches Currency Forward Rate Bias Indexes
Index provider FTSE Group (FTSE) and Record Currency Management, a specialist currency investment manager, have launched the first set of indexes within the new FTSE Currency Forward Rate Bias (FRB) Index Series.
The new FRB5 indexes utilize the five most widely traded currencies (U.S. dollar, euro, Japanese yen, pound sterling, and Swiss franc) in a forward rate bias (also referred to as ‘carry’) strategy, according to a press release. Forward rate bias is the observed tendency of higher interest rate currencies to outperform lower interest rate currencies, the announcement explained. This outperformance is captured through a series of rolling one-month forward contracts, equally weighted across all 10 currency pairs.
Research from Record shows that FRB provides a fundamental and sustainable return stream that rewards the risks associated with holding higher interest rate currencies. The annualized return of the FTSE Currency FRB5 total return index in USD is 9.7% p.a. since 1978.
The new indexes will be calculated on a fully investable basis and published daily by FTSE (both excess return and total return). These indexes can be used for portfolio construction, index-tracking management, including within financial products such as ETFs, and benchmarking active currency strategies.
More information is available at www.ftse.com.