We gain exposure to currencies other than the Australian dollar as a consequence of investing across global investment markets.
How currency hedging works
Currency hedging strategy
A currency hedging strategy plays an important role in managing investment returns. We use it to mitigate the risks of fluctuating exchange rates when investing internationally.
It’s the process of entering into arrangements that involve converting one currency into another on particular terms, which can provide some certainty in the face of fluctuating exchange rates.
We have exposure to foreign currencies through investing in international shares (including international listed property trusts) and international bonds, as well as international alternative investments.
As such, the fluctuation of exchange rates against the Australian dollar can contribute to, or detract from, the returns of the Fund.
To manage this currency risk, we have a policy of hedging some, or all, of our international currency exposures to manage the impact of fluctuating exchange rates. The level of hedging we use generally varies across the different foreign currencies. At particular times, however, our exposure to some foreign currencies may be unhedged.
Our investment team is responsible for setting the currency hedging levels for the various currency exposures within the international asset classes, having regard to current and expected financial market conditions.
We employ a specialist currency investment manager to implement the bulk of the Fund’s currency hedging program.
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