Research

Currency hedge rebalancing: resist the fixed idea

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Date 13 Oct 2020

Many Swiss institutional investors routinely rebalance their foreign currency hedges at the London fix on the last working day of the month. Whether this is done for convenience, tracking error or liquidity reasons, we show that significant sums of money can be saved by anticipating these readjustments, especially when they are expected to be large….

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Differentiate your hedge through interest rate differentials

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Date 05 Feb 2020

For Swiss investors, the current and unprecedented low level of domestic interest rates has dramatically raised the costs of hedging foreign currency risk. Because these vary between currency pairs, one may be tempted to capitalize on such differences and design a hedging strategy that optimizes costs for a set level of risk. In our case…

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Hedged share classes – What’s hiding behind the hedge?

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Date 23 Apr 2019

Many investment funds holding assets denominated in foreign currencies also offer their clients the option to invest in a share class that eliminates the resulting currency risk – a hedged share class. In this article, we investigate the effectiveness of these share classes in hedging currency risk and adding value to an investment portfolio, particularly…

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