FX Concepts Loses Largest Institutional Clients, Employees

Institutional investors and employees are cutting off ties with FX Concepts, a currency hedge fund with around $2.9 billion under management, former employees tell aiCIO.

(February 13, 2013) -- New York-based currency hedge fund FX Concepts has lost two of its largest clients: the Pennsylvania Public School Employees' Retirement System (PSERS) and the Bayerische Versorgungskammer (BVK) pension fund in Germany.

With the exodus of institutional capital, employees have also cut ties. Just a couple of years ago, the firm totaled around 60 employees. Today, the count is 44, according to Robert Savage, chief strategist at FX Concepts. In the last couple months, more than 10 of its employees have been fired, resigned or are in discussions about leaving, including Scott Ainsbury, a senior portfolio manager at the fund, several of the firm's former employees told aiCIO on the condition of anonymity. They added that the value in assets under management of the firm went from around $15 billion in early 2008 to around $1 billion today, largely due to the loss of their institutional clients.

FX Concepts issued the following statement: "While we cannot confirm any specific client departures due to our confidentiality agreements, we acknowledge that it has been a volatile environment for FX as an asset class and as a result, our AUM has experienced a recent decline. We have seen that due to underfunding issues, some investors are considering their long-term investments in currency and taking this time to rebalance their portfolios into what they perceive to be higher yielding investments."

"Our currency strategies have not performed well in the last three to four years, and institutional investors are moving away from currency," one former FX Concepts employee told aiCIO. "Institutional investors are trying to move into risk parity and global macro strategies."

FX Concepts, however, is not alone, as currency investors worldwide have felt the impact of a volatile market environment. "Currency is highly correlated to equity markets, and we've felt that turbulence," said Savage. "Is the firm suffering? Yes. Is AUM went down? Yes. Is that typical of a business? Yes."

He added that although the firm had lost clients, it had taken on new institutional mandates.

According to Savage, the firm is still feeling the harsh effects of the financial crisis, when it realized many of its models failed. Since then, he noted that the firm has paid greater attention to more systematic measures of risk.

Despite the loss of assets and continued turnover, some employees say FX Concepts has a more optimistic future outlook. "This year, we see the FX markets starting to show the usual cyclical upswing in volatility and a trend that follows a global recovery. We believe that the worst has passed and expect to see a reasonable return over the next five years," Savage said.

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