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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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