Why Currency Returns and Currency Hedging Matters

categories: Indexes, MSCI Index Research, Investing (Investment Management), Equities, Multi-Asset Class, Research Paper, KOUZMENKO Roman

With the growth of international investing, the impact of currency movements continues to be of significance. All investors are exposed to currency risk when investing in equities abroad and adverse moves in exchange rates can dramatically impact their performance. Hedging currency exposure is one technique for taking currency risk out of the equation when investing in foreign companies. The MSCI Hedged Indices provide one way to measure the performance of currency hedged equities. Here we explore the effects of currency on foreign investments and how currency hedging can help investors who do not have a viewpoint on the direction of exchange rates.

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