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Learning, Sharing, and Teaching => Investor Alley => Topic started by: wapiti on March 27, 2016, 07:29:06 AM

Title: Hedged ETFs for european investor ?
Post by: wapiti on March 27, 2016, 07:29:06 AM
Recently, the number of hedged ETFs have strongly increase for european investor. If you are an european investor, is it interesting to pay more TER for the same indice hedged ?

for exemple 0.3 % for the MSCI World and 0.55 % for the MSCI world hedged in CHF
Title: Re: Hedged ETFs for european investor ?
Post by: Heckler on March 27, 2016, 09:28:56 AM
Here is the Canadian point of view that I agree with. 

http://canadiancouchpotato.com/2016/03/07/ask-the-spud-is-it-time-to-hedge-currency/

Quote
Trying to time currencies no different from any other tactical move: you need to be right on the way in and on the way out, and you probably won’t be. Indeed, most investors who engage in this kind of activity have only a vague idea of when they will reverse the trade, and even those with a process can fall prey to their emotions and fail to pull the trigger.


There are more good reasons to stay unhedged in the article. 
Title: Re: Hedged ETFs for european investor ?
Post by: wapiti on April 17, 2016, 06:08:51 AM
The article is interesting. However, they are telling not to hedged because they predict that the CAD will go up.
On my point of view, this is not an objective analysis ( it's like chosing a stock because of whatever)
Title: Re: Hedged ETFs for european investor ?
Post by: daverobev on April 17, 2016, 12:34:30 PM
Hedging is bad. It costs you money, and provides little to nothing in return.

Hedging is imperfect; it is a buffer for currency fluctuations.

If you do not want the volatility (== risk/reward) inherent in currency fluctuations, you should not be invested in stocks at all either - there is more fundamental risk on the stock side than the hedging side.

Now, the other thing is that if a currency drops, there is a good chance the stock market in that country will go up! Why? Because all the good companies in that country suddenly got a hell of a lot cheaper. If it does NOT go up, great - good chance to buy (very) low.

You have to ask yourself: What do you think the addition of hedging will get you? Because over the long term, what it will get you is an increased drag on returns for no benefit.

IMHO/I Am Not A Financial Advisor.
Title: Re: Hedged ETFs for european investor ?
Post by: Dago on April 17, 2016, 02:39:53 PM
Most people here are strongly opposed to hedging for pretty good reasons.
However, you mention a chf hedged etf, making me think that you are a Swiss. If this is the case, i.e. you earn in chf and spend in chf, hedging to chf makes sense in my opinion. The Swiss franc has always outperformed other currencies (for as far as I could go back, I don't have the reference at hand but can look it up later). Therefore we are not in a case where the currencies always come back to the same equilibrium like it is usually argued in such discussions.

A Swissinvesting in a dollar fund in the 80s would have lost enormously since then, a lot more than the extra TER.
Title: Re: Hedged ETFs for european investor ?
Post by: wapiti on April 17, 2016, 03:05:23 PM
Hi Dago,
I agree with you. However, i need to do more simulation, because the MSCI world is hedged in CHF on a monthly basis (like most ETF).
1. I'm not really sure what the influence in long term (7 years+)
 2. what is the impact of the hedging on the inflation
Title: Re: Hedged ETFs for european investor ?
Post by: Dago on April 18, 2016, 01:44:56 PM
Hi titi22,

I am interested in the results of your investigations if you don't mind sharing them.

Cheers,
Title: Re: Hedged ETFs for european investor ?
Post by: wapiti on May 07, 2016, 10:09:35 AM
I was looking to analyse two indices:
S&P 500 CHF HEDGED,  MSCI World CHF Hedged
Unfortunatly, only ten years of data is availabe for the S&P 500 CHF HEDGED indices on http://us.spindices.com/indices/equity/sp-500-chf-hdg
and for  MSCI World CHF Hedged the oldest data I can find is a poor pdf https://www.msci.com/documents/10199/006fd42a-bc92-4074-8cf6-453b6afa9996

If someone is a msci suscriber and/or spice-indices suscriber, i would be happy to have more historical data.