Investment Funds

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Investment management firms manage financial assets and funds of other institutions. They use the currency market to facilitate transactions in foreign securities. Aside from the international equity portfolio of firms, several new forex mutual funds have been created to allow investors to track long-term trends in currencies. Some investors use these funds to help them diversify their portfolios. This can also work as a forex trading strategy as it can be used to hedge currency losses in the spot market, especially in terms of the US dollar. Most investment management firms are able to manage the currency exposures of clients with the aim of generating profits as well as limiting risk. The actual number of these investment funds that exist is small (relative to banking institutions and commercial traders). Many investment firms have a large amount of assets under management and thus account for a huge share of daily currency trades.

The foreign exchange market is split into levels of access. The top level is the interbank market, which is made up of the largest investment banking firms. The interbank market accounts for 53% of all the forex transactions. Some smaller investment banks, though, are tiered below this level.

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