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Barclays duration hedged indices1/29/2023 ![]() ![]() For example, the unhedged Bloomberg Barclays Global Aggregate Index returned 14.83% in euros since January 2018, while the same index returned only 5.87% for the period if noneuro currencies were fully hedged to the euro. Indeed, the dollar’s rise since 2018 has been welcome news for non-US investors who use unhedged global bond indexes. ![]() ![]() Investors who choose not to hedge do so for several reasons: They see currency exposure as a risk diversifier as well as a source of return, and they view currency hedging as unnecessarily costly, especially for investors from countries with low and even negative yields. A similar survey of Morningstar’s retail-oriented UCITS funds has most of their benchmarks unhedged. Why don’t many investors hedge?Ī PineBridge survey on global fixed income benchmarks used by institutional investors on eVestment revealed that almost half of fixed income investors are unhedged. Here, we explore the pros and cons of hedging, explain how we arrived at our findings, and review the benefits of overlaying a currency strategy. ![]() Should fixed income investors hedge currency exposure in their portfolios? That is the question – and the simple answer is “yes.” Yet, for investors looking to take currency exposure to generate additional return or to avoid hedging costs, we have found that a currency overlay on top of a hedged portfolio – rather than taking passive currency exposure in an unhedged benchmark – is the best approach. ![]()
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