Overlay Solutions

We understand that our clients want to maintain their decisions around exposure targets and asset allocations.  We also believe the exposure in a portfolio should be a result of an investment decision and not a consequence of market movements. Our role is to ensure that the exposures are achieved and maintained in the most efficient form available.

The QIC Overlay Solutions team partners with clients to implement their mandates as efficiently and effectively as possible.  We look to understand our clients’ objectives and constraints to design and/or implement overlays to provide enhanced portfolio outcomes and achieve risk objectives in the most cost-effective and efficient way.

We aim to achieve this through our deep understanding of markets, and following our rigorous process with support from a strong risk-management framework.  We are part of an investment team, not just an isolated overlay or implementation team.

 

Our services include Currency Management, Asset Overlays and Implementation.

Currency Management

We offer a tailored implementation approach to currency management, conforming to investor’s priorities, to ensure that their needs are met efficiently and effectively. Our team operates across the full spectrum of currency overlay solutions, from the determination of optimal benchmark hedge ratios, through to implementation and dynamic hedging.

  • Optimal Hedge - we believe a universal optimal hedge ratio doesn’t exist, even when comparing funds with the same domicile and asset mix. Instead, individual investor’s unique objective should be the starting point to find the optimal hedge.
  • Dynamic hedging - the Australian dollar is cyclical, and prone to over-shooting both to the upside and downside. This generates compelling opportunities for alert investors over the cycle. A well designed dynamic currency hedging strategy will mitigate miscalculations in hedge ratio decisions because it avoids having to make a forecast and can adjust. The strategy increases your participation in currency markets, it reacts to currency moves and in the process it removes the headache of trying to second-guess the market.


Asset Overlays

Strategic asset allocation (SAA) and dynamic asset allocation (DAA) decisions are important return drivers for institutional investors. However, market fluctuations cause allocation weights to move significantly away from targets. When rebalancing market exposures, we seek the most efficient structure from a pricing and risk perspective.

QIC implementation and risk management framework assists clients by implementing the following overlay solutions:

  • Market exposure - adding or hedging global capital market exposure across equities, interest rates, credit, inflation, and commodities, including smart beta strategies 

  • Tactical and dynamic asset exposure (TAA and DAA) - implementation and management of portfolio tilts 

  • Transition overlays - providing short-term market exposure while working closely with a clients’ transition manager to ensure continuity of exposures 


implementation

We offer implementation services for simple and complex investment allocations across a range of global liquid markets to assist clients in achieving their investment objectives. Successful implementation is achieved via QIC’s robust and repeatable five step portfolio management process set within an institutional risk management framework, not an operational add-on.

Factors we consider when implementing on behalf of clients:

  • Timeframe
  • Liquidity
  • Funding and Margin
  • Counterparty Risk
  • Implementation Costs

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