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Clipped: The Downside Of Funds That "Hedge" Currencies

FYI: It seemed like a can't-miss idea at the time.
Investors scrambled last year to get into a new breed of exchange-traded funds, ones that own foreign stocks and use complicated trading strategies to insulate investors from the swings created by changing currency values. But a year after this new style of ETFs drew billions of dollars and become one of the hottest trends in investing, some investors are now leaving after seeing the strategy's downside — and locking in losses.


  • There's nothing special here about ETFs. Some plain old vanilla OEFs hedge currencies as well.

    FMIJX. 97th percentile YTD, closed April 30th. Coincidentally, the article points out that "The dollar reached a peak against the euro last March".

    VMVFX. 93rd percentile YTD.
  • This write is DATED: March 24, 2016

    Two large hedged etf's, HEDJ and DXJ were funky, along with other OEF's during the 18 month or so period noted by the author.

    Chart of both of the above since the publish date of the article. They are not loud barking equity return dogs:,HEDJ&n=350&O=011000

  • The managers of FMIJX have stated they do not want the merits of their investment choices "diluted" by currency exchange factors, and there's a certain logic to that stance. Wonder whether the fund's many new shareholders understood the role hedging played in the fund's performance since its inception.
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