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Currency hedging:

Share class hedging may not be best-in-class

Currency hedging:

Share class hedging may not be best-in-class

27 August 2025 Solutions

Many invest in currency-hedged share classes to manage the currency risk of international assets. The approach may seen efficient and cost-effective, but our analysis shows that this may not be the case.

Our analysis into the hidden costs that can be incurred by managing currency for an international portfolio via a currency-hedged share class found three key issues.

  • The inefficiency of duplicating hedging across different funds with different managers.
  • The inefficiency of managers of currency hedged share classes holding cash buffers for FX forwards.
  • How some hedged share classes do not hedge all currency risks they are open to.

We make the case for using a dedicated currency manager to manage all currency exposure. 

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