What is Currency Hedging?
Currency hedging (“hedging”) is a strategy to reduce or take advantage of the impact of currency movements on foreign investments.
Hedging can allow you to participate in the local market returns of stocks and bonds around the world – without being adversely affected by a rising or declining Canadian dollar.
At Bridgehouse, we have hired the services of one of the largest currency managers in the world – State Street Global Markets (SSGM) – to oversee currency management of our hedged series.
- Brandes Global Equity Fund (Hedged)
- Brandes U.S. Equity Fund (Hedged)
- Brandes Corporate Focus Bond Fund (Hedged)
- Lazard Defensive Global Dividend Fund (Hedged)
- Lazard Global Compounders Fund (Hedged)
Currency Hedging Solutions
Investing globally provides opportunity for Canadian investors.
While Investing globally provides a tremendous opportunity for Canadian investors, it carries additional risks, including foreign currency fluctuations. Depending on the movement of the Canadian dollar, foreign currency exposure can be a tailwind or a headwind to your total returns.
Goals and approaches
Each investor (in consultation with an advisor) will have his/her own goals for using a hedging strategy. Here are three core approaches and how they can contribute to a portfolio:
Approach and Rationale
Embrace foreign currency exposure
Gain source of additional diversification
Minimize foreign currency exposure
Reduce source of unnecessary risk
Implement your own views on the direction of currencies
Seek to improve total returns in your portfolio
Bridgehouse is responsive to investor needs
At Bridgehouse, we recognize and appreciate the varying needs of our clients and are committed to providing solutions to meet those needs, including the expansion of our currency hedged series on popular Bridgehouse Funds.
How currency hedging at Bridgehouse works
Bridgehouse has directed State Street Global Markets (SSGM– )– to consistently target a full hedge on all foreign-developed market currencies (e.g., USD, Euro, Yen, Pound Sterling, etc.) for its hedged series of funds.
To fulfil these standing instructions, SSGM enters into 3-month forward currency contracts, which lock in the future exchange rate between the CAD and these foreign currencies. The hedged series of funds at Bridgehouse have an "H" beside their series name, such as AH and FH.
The benefits of Bridgehouse’s approach
Because you know that foreign-developed market currencies are being fully hedged and that we maintain this approach consistently, you can comfortably decide how much foreign currency exposure you want. And knowing that SSGM is working on your behalf every day provides you with greater peace of mind in the execution of the Bridgehouse hedging program.
State Street Global Markets
Leading Currency Management Provider
SSGM– has provided currency management products since 1992 and services a wide range of global clients. In delivering these services, SSGM– acts as an agent – not– in a principal capacity – and therefore does not provide discretionary investment management services.
- Agency Model – As a currency manager, SSGM acts as its clients’ agent and does not provide discretionary investment management services
- Experience – More than two decades of experience servicing some of the largest fund managers in the world
- Expertise – A dedicated team of highly experienced currency management specialists
- Depth – Market-leading research and analytics
- Size – Allows for volume benefits and access to liquidity via a panel of highly rated counterparties
- Scale – Robust systems and processes built to scale
- Transparency – Adherence to a client’s order execution policy and full suite of execution and performance reports
If you’re an investor, speak to your Advisor about the role of hedging for your portfolio
A hedging strategy could be of genuine benefit for your Bridgehouse investment portfolio. Speak to your Advisor about how it could contribute to achieving your personal financial goals.