Dollar Hedging pension....Good idea ?

Linton

JohnWinder said:

I do not see that hedging provides any net benefits over the range of possible currency values and behaviour of the underlying investments

Then ask yourself if a Japanese investor, investing in global stocks 40 years ago would have been better off hedged or not hedged.

Of course for every situation where hedging would have been beneficial there is another one where it would not. For example a UK investor investing in a global stocks fund 40 years ago. Making a net gain from hedging requires skill or luck in currency market timing. 

Albermarle

Most of us British people with US investments/tracking funds which are 65% US, have benefitted a lot by the recent strength of the Dollar. It has to a large extent taken the sting out of the large drops in US markets this year. If the Dollar were to weaken significantly against other currencies, including the Pound, it could be pretty painful. 
Moving some now to hedged funds could be a good move. As a previous poster said .Have half and half to minimise your regret?

JohnWinder

Picking something very special out of all the choices you have tells me little about the probability of benefiting from hedging stocks.

That, I could not agree more with. But when someone says they can’t see hedging can provide ANY benefit whatever the currency or market, then I think the Japanese example helps them, but more importantly others, see it is possible. I might be wrong that hedging would have helped the Japanese investor, if so let us hear about it. But when absolute statements appear as though they can mislead naive readers, sorry, but I’m stepping in.

Linton

JohnWinder said:

Picking something very special8: out of all the choices you have tells me little about the probability of benefiting from hedging stocks.

That, I could not agree more with. But when someone says they can’t see hedging can provide ANY benefit whatever the currency or market, then I think the Japanese example helps them, but more importantly others, see it is possible. I might be wrong that hedging would have helped the Japanese investor, if so let us hear about it. But when absolute statements appear as though they can mislead naive readers, sorry, but I’m stepping in.

Like all timing the market strategies only the future can say whether hedging is beneficial or counter productive. If one is making the decision now to hedge for the future rather than with the benefit of hindsight, I see no net benefit in doing so. Perhaps someone can explain why I am wrong, how a general policy of hedging every foreign investment or using some clever criterion for hedging can provide a net gain. A one-off example explains nothing about a general strategy.

Where hedging is useful is in trading when one is prepared to sacrifice some upside to protect the downside. But trading is not what sensible naive investors are doing.