We investigate whether structurally hedging the currency risk of global equity products benefits long-term investors. Based on a 35 year back-test of 3 smart beta strategies from 6 currency perspectives, our answer is a qualified “yes”. Currency hedging was effective in reducing risk and...

We found that it is important to address currency risk to take full advantage of the benefits of minimum-volatility investing. In our backtest that extended back to 1979, we found that hedging currency risk would have led to a higher Sharpe ratio by decreasing risk while maintaining return at a...