Manage Currency Risk

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Managing coin risk in spherical equity portfolios: Key considerations for institutional investors
By Michael Cantara, CFA, Ben Kottler, CFA, and Joseph Flaherty
EXECUTIVE summary Events of the past decade provide ample evidence that bullion fluctuation can have a significant daze on investment returns for investors in securities outside of their base up-to-dateness. For example, short after the euro was launched, as shown in Exhibit 1, the U.S. dollar apprehended versus the euro, but over the past several years it has depreciated notably and remained weak. Exhibit 1 â€" U.S. dollar per euro 1/1/99 9/15/2007
U.S. $ 1.4 1.3 1.2 1.1 1.0 0.9 0.8 99 Data Source: IDC / eShare 00 01 02 03 04 05 06 07

MFS® believes that currency risk is an weighty consideration for institutional investors and that the opera hat elbow room to manage this risk is through an active or inactive currency hedging program at the plan or overall portfolio level. We make the quality that currency risk is an important consideration for investors by debunking two of the most super acid arguments that are made against currency management. We then discuss reasons why we believe currency hedging strategies for equity investments are best employed at the overall portfolio level.



Finally, we use a case study to illustrate how MFS integrates currency risk considerations within our bottom-up security selection process.
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Currency an important consideration

Currency fluctuations can significantly yarn-dye returns and im twosome funding levels. Some argue that the impact of currency fluctuations on the performance of portfolios with multi-currency exposure is nominal, particularly over durable periods. As with many such debates, it depends on which currency pair you choose and over which timescale. This argument may hold unbowed for certain currencies over certain time frames (typically long), but not in other circumstances, such as...If you want to get a full essay, order it on our website: Orderessay



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