Apr 30

To Hedge or not to hedge?…MSCI provides an answer

Interesting paper by MSCI Research came out eaarlier in the week about hedging…click here. Its US centric with some interesting analysis and but the basic conclusion should apply to any country. i.e. basically over the long run currencies revert to the mean resulting in no real difference, but over the shorter term currency effects can have quite an impact. However, for this US study, hedging “generally reduces volatility most of the time for most currencies at all horizons”…BTW…this study was analysing equity returns (all global fixed interest should be hedged in aportfolio context assuming you are using it for income whereby currency effects add way to much volatility for a “defensive asset”).

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