Currency Hedges for Non-U.S. Stock Investments Seen Backfiring
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U.S. investors who hedge against a rising dollar when buying shares overseas may end up with more risk rather than less, according to Catherine LeGraw, a member of Grantham, Mayo, Van Otterloo & Co.’s asset-allocation team.
“There is little notable risk reduction beyond a one-year holding period,” McGraw wrote two days ago in a report. “For longer investment horizons, hedging has resulted in marginally higher volatility.”