Buying foreign assets is like getting a 2-for-1 deal: when you make a foreign investment, it comes with exposure to currency fluctuations.
It raises the possibility of losing money due to unfavorable moves in exchange rates. On the flipside, it can also give you positive returns if the rates swing in your favor.
To minimize currency risk arising from exposure to international assets, there are two solutions to consider: a passive or a dynamic currency hedging approach.
The same reason why you would go to a doctor instead of self-medicating. The symptoms may be obvious to you, but the right remedies may not be.
Below are some options you may have considered in mitigating your risk.
Internal hedging is often the first option that comes to mind, but it may not be as cheap or efficient in reality. Operational risks, liquidity and counterparty issues are just some of the potential pitfalls to watch out for when looking at this option. When getting a quote from your depository bank, it’s important not to get taken advantage of. A lot of investors might think they get a good deal, but don’t have any way to measure the quality of their trading execution.
A one stop shop provider like your depository bank or investment manager can use a hedged product to offer customers the opportunity for foreign investments in their home currency without currency risk. A particular challenge in this kind of setup is evaluating the quality of trades that are taking place, with transparency being an issue – it’s easier to pass off poor executions when they happen behind closed doors.
With independent specialists like PPI, you get a team that is free from the conflicts that arise from hiring generalists like banks or financial institutions. We don’t make decisions based on our own interest – our goal is to always put your portfolios and satisfaction first.
Our currency solutions are designed with you in mind.
Over the past 23 years as an independent specialist in currency risk solutions, we’ve built a solid track record by staying true to our values: client satisfaction, flexibility & independence, and research & innovation.
We take care of currency volatility so that you can focus on making sound investment decisions and growing your portfolio.