August 7, 2006

Global Pension Funds should allocate at least 20% to foreign exchange, according to Deutsche Bank Research

Deutsche Bank has released new research titled “Currencies: Pensions Saviour?” which suggests that for global portfolios to benefit the most from foreign exchange, allocations to FX should be in the order of 20%-30%. In that way, the quality of returns can be significantly enhanced, not least by considerably reducing the duration and magnitude of phases of returns underperformance.

Foreign exchange has often been viewed as an alternative asset class, rather than as a comparable asset class to bonds and equities, due in part to the absence of a widely followed benchmark and ignorance of the return characteristics of FX.

Bilal Hafeez, Global Head of FX Strategy, who devised the research commented, “We feel that foreign exchange should be viewed as an asset class similar to bonds and equities.  It has exhibited long-term systematic returns or “beta” which are comparable, if not better, than both bonds and equities since 1980. It also has greater liquidity than both.

“We believe the prevalence of underfunded pension plans increases the chances of pension crises over the next few decades.  Numerous approaches have been proposed to address the issue, including better matching of assets to liabilities by using fixed-income products, the use of derivatives and of alternative asset classes.”


For further information, please call:

Deutsche Bank

Stephanie Smart  (44 20) 7545 2908
Press & Media Relations


Deutsche Bank

Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With Euro 1,058 billion in assets and 65,435 employees in 73 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.