When large multinational companies use diversified instruments to conduct sophisticated financial operations to protect themselves from exchange rate fluctuations, some people question whether exchange rate hedging is necessary for ETFs.

When large multinational companies use diversified tools to conduct sophisticated financial operations to protect themselves from exchange rate fluctuations, some people question whether ETF is necessary to conduct exchange rate hedging.

Vincent Deluard, global head of macro strategy at broker INTL FCStone, recently wrote in a report to clients, “Buying hedging ETFs is hedging the exchange rate of the exposure positions of those companies that have already hedged. Double hedging In addition to incurring additional fees and commissions, there is no real benefit.”

Although currency hedging can bring outstanding performance when exchange rates fluctuate significantly, in the medium and long term, tracking the same index, with and without hedging. ETF performance differences will shrink.

However, there are still other asset classes such as fixed income products, which will make investors think that exchange rate hedging ETFs are more valuable targets. Because bond coupons are limited and returns are stable, exchange rate hedging ETFs are needed to eliminate the impact of violent exchange rate fluctuations.

Deutsche Asset Management's Wiegand said, "If we look at the current asset mix, a relatively high proportion of funds flowing into currency-hedged ETFs is in the fixed income area."

Deutsche Asset Management's inflows into fixed income so far this year About 37% of ETF funds flowed into ETF products with exchange rate hedging. However, among stock ETFs, only 21% of funds flowed into hedged ETFs.

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