The growing chorus of fund managers lending weight to a belief that emerging market equities are the only ones able to deliver over a 4.5% return over the next decade means an increase in the demand for exotic currency settlement capabilities.
Taking examples of work done with boutique stock brokers whose clients need to clear USD for dollar denominated investments, we take a look at those currencies that are already ready for open market proliferation, those that aren't and how you can make use of existing structures to maximise your FX position.
The first thing to say is that we won't be venturing our thoughts on which currencies will appreciate or devalue over the next 10 years.
What we will be doing is explaining some of the obstacles you already face when trying to settle exotic or even ND currencies and discussing the common treatments for matters that rely on as yet undeveloped domestic financial and banking systems in emerging markets, particularly those with existing currency controls.
At present the vast majority of retail and professional investors, no matter where around the world they are located, rely on banks, third party brokers/intermediaries or prime brokers to handle the currency concern associated with investing in an asset class denominated in a currency other than their core operating tender.
Professional and institutional investors are not our focus. Their FX turnover means they will achieve similar rates to those we buy at.
Our focus are those retail investors or micro-funds holding positions, maybe large or maybe small, in other currencies and whose own proprietary FX activity does not permit them access to the same rate competition as a currency broker like us.
These are where we can positively impact and undercut on margin and provide a clearer and more efficient payment processing mechanism.
Niche brokers in small-cap non-GBP denominated stocks handle significant foreign exchange traffic.
Whether they realise it or not, leaving their client to settle purchases directly with a clearing house put the client on the back foot both in terms of their FX exposure for the position and in terms of added expense when an exchange is required.
It could not be simpler for a private client or professional investor to avail themselves of either a dedicated foreign currency account with their bankers, or to begin transacting and exchanging through a dedicated FX broker like Prime Cap.
Currency controls can make certain investment territories risky or uncertain in terms of clearing times and settlement currency, but, increasingly investors can settle in USD.
Given that USD is such a common currency for such settlements, the exchange and spread between GBP and USD (Cable) is often overlooked one deserving of a closer look or benefiting from a pricing exercise.
On the one hand, we find ourselves increasingly attractive to private clients called on to settle in USD for their capital markets activity, and, on the other, we have seen a distinct increase in the number of intermediaries incorporating our white-label FX platform capabilities in to their service offering to clients.
As a simple example:
Our private client invested in certain USD denominated assets over 18 months ago.
Prior to our involvement dividends and coupons, or simply USD following liquidation of any part of his portfolio in fact, would come back to his singular GBP brokerage account.
On realising he was at liberty to take receipt of funds through a personally source solution he began providing our USD client account details as the collection beneficiary for these monies.
The first thing we had feedback on was his appreciation of the automated alerts that tell him USD have arrived with us.
These funds are then immediately applied to his USD balance facility with us.
Each time he logs in in to our online system he can see the USD accruing.
It is then his choice whether to pay away from that balance as USD for another purchase, or for any other payment reason including sundry USD expenses for his Florida condo, or, he can flip USD directly in to GBP t