Hedged Global Investing - A Canadian Perspective

From a total portfolio perspective, currencies are a much larger component of return and risk for global bond portfolios than for global stock portfolios. Hence, on the surface, it may appear that only global bond managers need to focus on managing currencies. However, over different subperiods representing specific foreign exchange regimes, currency hedging significantly improved the risk-return tradeoff for global stock mandates. Therefore, global equity managers should also consider managing currency.