The Chartered Institute of Public Finance and Accountancy (CIPFA) has urged councils to carefully consider the risks of currency hedging.
The warning follows the decision by London Borough of Croydon to explore the option of currency hedging due to the high levels of volatility due to issues like Brexit.
With many local authorities reviewing their investment strategies, this option offers higher returns but also higher fees due to the monitoring needed.
CIPFA highlighted the traditionally cautious approach of council treasury teams that focus on long-term investments.
Joanne Pitt, CIPFA’s local government policy manager, said: “It is essential that the priority for local authorities remains the protection of taxpayers’ money.
“While the avoidance of all risk is neither appropriate or possible, authorities must ensure they do not take on an inappropriate amount of risk when exercising their investment powers.
“Investment in volatile markets does not sit right with the primary purpose of local authorities, which is the delivery of quality services to local residents.”
