Word on the Street: FSA proposal to reduce exchange rate risk

Fund groups will be able to offer hedged currency share classes on funds under FSA proposals, allowi...

Fund groups will be able to offer hedged currency share classes on funds under FSA proposals, allowing them to reduce any exchange rate risk. While Coll rules allow currency class units, fluctuations in the exchange rate between the class and base currencies can affect the investment return. Under the changes, managers will be able to use hedging techniques such as forward or derivative contracts, to eliminate this currency risk. All the costs of this, and profits and losses from the hedging, will only apply to the assets in the hedged share class. This type of share class is common...