Investment-style benchmarks — such as value investor, growth or quantitative — identify money management approaches in every giant investment sector with one glaring exception: the $4 trillion foreign exchange marketplace. Forget dozens of terms that money managers use to compare performance in equity and fixed-income markets. In currency markets the chief benchmark is zero. At the end of the day, traders either make money or they don’t.

The status quo needs to change, especially now, say authors Richard Levich at NYU Stern and Momtchil Pojarliev at Hathersage Capital. Investors mindful of risks and hefty costs — often a 2 percent management fee and 20 percent of excess profits — deserve to know which currency managers really deliver their money’s worth. A landscape with scarce returns adds urgency.

“If currency managers are charging a substantial management fee,” Levich says, “can you replicate their strategy with simple currency trades in most money-management tool kits?” The new paper fine-tunes their evidence that three basic ways to manage currency portfolios dominate most outcomes in currency markets, and any skilled money manager can replicate them.

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