Penrich Capital is a premier Hedge Fund Manager established in 2004 on the principles of high performance, business transparency, and ensuring the firm's interests are aligned with client's interests. Penrich Capital's Hedge Fund is composed of highly skilled analysts; each member of its investment team having nearly 20 years of financial market experience. Collectively, the team has worked in markets in North America, Europe, Asia and Australia. Macroeconomic analysis of major global and regional trends form the heart of the investment strategy.
Trading Methodology
Penrich Capital's foreign exchange investment strategy is macro-economic based. Penrich's own research is used in conjunction with Penrich's network of contacts in public and private sector institutions around the globe. Particular attention is paid to developments in international balance of payments, monetary policy and cross border investment flows. Through this research, the investment team seeks to identify exchange rates that are significantly above (or below) the value that economic fundamentals suggest is appropriate.
Because exchange rates tend to revert back to their fundamental equilibrium rates, this process allows Penrich Capital to recognize potentially profitable opportunities. The final element of the investment strategy is the identification of the time frame during which the exchange rate will move back towards its fundamental value - an analysis of interest rate differentials and investor risk appetites is an important feature of this part of the strategy.
Currencies Traded
All currency pairs relating to USD, EUR, JPY, GBP, CHF, CAD, AUD and NZD.
Trading Methodology
Penrich Capital's foreign exchange investment strategy is macro-economic based. Penrich's own research is used in conjunction with Penrich's network of contacts in public and private sector institutions around the globe. Particular attention is paid to developments in international balance of payments, monetary policy and cross border investment flows. Through this research, the investment team seeks to identify exchange rates that are significantly above (or below) the value that economic fundamentals suggest is appropriate.
Because exchange rates tend to revert back to their fundamental equilibrium rates, this process allows Penrich Capital to recognize potentially profitable opportunities. The final element of the investment strategy is the identification of the time frame during which the exchange rate will move back towards its fundamental value - an analysis of interest rate differentials and investor risk appetites is an important feature of this part of the strategy.
Currencies Traded
All currency pairs relating to USD, EUR, JPY, GBP, CHF, CAD, AUD and NZD.
Establishing a Long GBP Position
Posted 10-31-2008 at 09:26 PM by Penrich Capital
The currency moves in recent months have been dramatic and opened up new opportunities. It was only three weeks ago that we stopped using GBP as one of our shorting currencies but the case for buying Sterling has now become sufficiently strong that we have begun establishing a long position. In trade-weighted terms, the currency is at its lowest point for more than a decade and is approaching the low point of the mid 1990s.
GBP is now below its longer term averages versus all of the other major currencies except the Australian dollar. In some cases, the figures are barely significant (i.e. less than 10%) but there are other divergences that are in the range of 15%-35%.
The fact that the currency is weak relative to history does not necessarily mean that it is worth purchasing. When we were using GBP as a shorting currency, the most important reason was the large UK external deficit. For most of 2005-2007, the UK incurred a current account deficit of around 3%-4% of GDP despite relatively solid growth in the major export markets. This year, due in part to the lower currency and in part to more restrained domestic demand and imports, the deficit has narrowed. The last time that GBP was near current levels, the deficit was eliminated and the UK had a balanced external position for a couple of years. It is possible that the external deficit could become negligible in the coming year.
We are looking to build up a long position in GBP which is funded using a basket of CHF, EUR and CAD. We have begun establishing the position this week and will look for opportunities to increase the size of the position. We will also examine the possibility of adding JPY to this funding basket.
The attached pdf document provides charts and tables illustrating the points. Further details can be found on our website - www.penrich.com.
GBP is now below its longer term averages versus all of the other major currencies except the Australian dollar. In some cases, the figures are barely significant (i.e. less than 10%) but there are other divergences that are in the range of 15%-35%.
The fact that the currency is weak relative to history does not necessarily mean that it is worth purchasing. When we were using GBP as a shorting currency, the most important reason was the large UK external deficit. For most of 2005-2007, the UK incurred a current account deficit of around 3%-4% of GDP despite relatively solid growth in the major export markets. This year, due in part to the lower currency and in part to more restrained domestic demand and imports, the deficit has narrowed. The last time that GBP was near current levels, the deficit was eliminated and the UK had a balanced external position for a couple of years. It is possible that the external deficit could become negligible in the coming year.
We are looking to build up a long position in GBP which is funded using a basket of CHF, EUR and CAD. We have begun establishing the position this week and will look for opportunities to increase the size of the position. We will also examine the possibility of adding JPY to this funding basket.
The attached pdf document provides charts and tables illustrating the points. Further details can be found on our website - www.penrich.com.
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Recent Blog Entries by Penrich Capital
- Misaligned European Currencies - Case 1 GBP (01-07-2009)
- Staying Short the CHF (12-10-2008)
- Staying Long the AUD (12-05-2008)
- Waiting Before Buying the NZD (12-03-2008)
- Building Up a Long GBP Position (11-26-2008)
