Buy side debates FX as an asset class

Paul Chappell, managing director at hedge fund C-View, said FX continues to have "patchy respectability" due to its relative infancy and the variety of investor aims.

James Binney, director of FX analytics and risk advisory at ABN Amro in London, said one difficulty in defining currency as an asset is its expected return of zero. But there is the potential for alpha, ie, the ability to make money.

Neill Nuttall, senior currency strategist at JP Morgan Fleming Asset Management, agreed that although currency does not have an internal rate of return it should be seen as an asset class, as it justifies the allocation of risk.

Despite this, increasing interest comes mostly from hedge funds, said Binney, due to the respectability problem. But Nuttall believes this will change, even if returns from equities improve, because there is now a history to currency management. "In the mid-nineties the industry was so new that there wasn’t the data for people to assess whether or not this was a viable strategy. That data now exists, and it is persistent."