To hedge or not to hedge? The assets that benefit the most, and the least

Reducing volatility and maximising returns

Many, if not most, investors take a global perspective when building portfolios to achieve their investment goals, writes Nathan Lacaze, co-chief executive officer, EMEA at Dimensional Fund Advisors.

However, with the potential benefits of increased diversification comes exposure to foreign currencies.  Currency returns can be volatile, creating winners and losers. While there is little evidence that currency movements can be predicted, should investors still consider whether to hedge their currency exposure? To answer this question, it is helpful to see whether exposure to currency returns is consistent with the individual's investment goal. Some investors may want to hedge currency exposure due to the volatility of currency returns and the impact on a portfolio. In global ...