Advantages / disadvantages of ETF’s with currency hedge

T

Tom

New member
Dear valued POORSWISS community

I would be happy, if we could discuss about the advantages / disadvantages of ETF’s with currency hedge.

Special for the “MSCI World” ETF.

My point of view, the only disadvantage is the higher price for the ETF, because the ETF provider has to make forward exchange transactions.

“Nobody knows”, the exchange rate between e.g. USD/CHF in the future.

Please share the thoughts with us.

Many thanks.

Best regards
Tom
 
Hi Tom

Indeed, the main disadvantage is the extra costs of the ETF itself. The second disadvantage is also that hedging is not 100% accurate on the long term. It will not protect you entirely.

Additionally, it only protects you from the price of the ETFs. But currency hedging will not protect the companies themselves, which could also be susceptible to exchange rate fluctuations. In the case of USD/CHF, this is probably not much, but if it's a global USD devaluation, it may be impacting the performance of US companies and there is nothing hedging can do here.

The general idea is that currency hedging is great for the short to medium term, but not so great for the long term.
 
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