Currency Crowdedness Generated by Global Bond Funds

Abstract

The focus of this article is the management style of global bond funds and their exposure to currencies. The author finds strong evidence that, in the short-term, global bond funds rely heavily on beta strategies and thus generate crowded trades in currency investing. As a result, global fixed-income funds add to the previously detected crowdedness in pure currency investing. There is empirical indication that the currency beta exposure has increased over the years.