Cardano is involved in several initiatives important to the pensions industry. Learn more about our involvement in the following projects:
- Hybrid Derivatives
- Value Transfers in Pensions
- The Currency Exchange Fund
- Hedging Longevity Risk
- IMQubator
The Currency Exchange Fund (TCX)
Long-term finance in developing countries is predominantly provided by international financial institutions (whether with a commercial or development agenda), since the domestic financial sector typically has hardly any access to long-term liabilities, combined with a limited ability to absorb maturity mismatches. International investors, however, almost exclusively provide their products in hard currency. The development of local currency alternatives, by all agreed to better match the needs of many local borrowers, has been limited due to the lack of availability of currency hedging tools.
Currency risks in developing countries have repeatedly been the subject of extreme crises in recent history. International investors still remember vividly the impacts of events such as the currency devaluation crises in Asia, Russia, Argentina and others. In such an environment, international investors cannot assume currency risks outright without mitigation through hedging.
TCX has provided a workable alternative solution to the problem, by developing a risk management model based not on direct hedging of exposures but rather on the benefits of global diversification to reduce currency risks to an acceptable level. TCX thereby removes the most direct barrier for international investors to develop local currency alternatives for their clients.
From the start of the project leading to the fund, Cardano teamed up with FMO (development bank of the Netherlands) to build the business case for TCX and, for this purpose, developed the risk models that lay at the foundation of TCX. Cardano is still the independent risk manager to TCX.
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