Currencies
We model currency movement based on a long-run trend to fair value (as determined by our adjusted purchasing power parity measure) and the path of relative inflation and interest rate differentials (i.e. real rates).
To help investors assess currency impacts, we calculate exchange rate impacts in both hedged and unhedged terms and translate to any reference currency as necessary.
The systematic component is the impact of currency hedging versus the USD. It is simply the difference in nominal cash terms between the two currencies and is subtracted against the local return to get the hedged USD terms. The high US rates relative to most developed countries means that non-US investors must pay a 'premium' to hedge US returns to their local currency. Thus, the high US rates are cut back to near local levels of return in Euro, Yen and CHF terms.
Exchange Rate Effects in USD terms
Currency | Currency | 5-Year Valuation (%) | 5-Year Valuation (%) | 5-Year Systematic (%) | 5-Year Systematic (%) | 10-Year Valuation (%) | 10-Year Valuation (%) | 10-Year Systematic (%) | 10-Year Systematic (%) |
|---|---|---|---|---|---|---|---|---|---|
Currency | Euro | 5-Year Valuation (%) | 0.8 | 5-Year Systematic (%) | -2.4 | 10-Year Valuation (%) | 1.2 | 10-Year Systematic (%) | -2.1 |
Currency | GBP | 5-Year Valuation (%) | 1.0 | 5-Year Systematic (%) | -1.4 | 10-Year Valuation (%) | 0.8 | 10-Year Systematic (%) | -0.9 |
Currency | Yen | 5-Year Valuation (%) | 2.6 | 5-Year Systematic (%) | -2.3 | 10-Year Valuation (%) | 2.5 | 10-Year Systematic (%) | -2.2 |
Currency | Swiss CHF | 5-Year Valuation (%) | 0.0 | 5-Year Systematic (%) | -2.8 | 10-Year Valuation (%) | 0.9 | 10-Year Systematic (%) | -2.4 |
Currency | Can Dollar | 5-Year Valuation (%) | 0.8 | 5-Year Systematic (%) | -0.3 | 10-Year Valuation (%) | 0.5 | 10-Year Systematic (%) | -0.1 |
Currency | Aus Dollar | 5-Year Valuation (%) | 0.3 | 5-Year Systematic (%) | -0.7 | 10-Year Valuation (%) | 0.1 | 10-Year Systematic (%) | -0.3 |
Currency | China Yuan | 5-Year Valuation (%) | -0.2 | 5-Year Systematic (%) | 0.5 | 10-Year Valuation (%) | -0.4 | 10-Year Systematic (%) | 0.6 |
Baskets | Baskets | 5-Year Valuation (%) | 5-Year Valuation (%) | 5-Year Systematic (%) | 5-Year Systematic (%) | 10-Year Valuation (%) | 10-Year Valuation (%) | 10-Year Systematic (%) | 10-Year Systematic (%) |
|---|---|---|---|---|---|---|---|---|---|
Baskets | EAFE | 5-Year Valuation (%) | 1.1 | 5-Year Systematic (%) | -1.9 | 10-Year Valuation (%) | 1.2 | 10-Year Systematic (%) | -1.6 |
Baskets | ACWII | 5-Year Valuation (%) | 0.4 | 5-Year Systematic (%) | -0.4 | 10-Year Valuation (%) | 0.4 | 10-Year Systematic (%) | -0.4 |
Baskets | ACWI x US | 5-Year Valuation (%) | 0.9 | 5-Year Systematic (%) | -0.9 | 10-Year Valuation (%) | 0.8 | 10-Year Systematic (%) | -0.7 |
Baskets | EME | 5-Year Valuation (%) | 0.2 | 5-Year Systematic (%) | 1.9 | 10-Year Valuation (%) | -0.3 | 10-Year Systematic (%) | 1.7 |
Baskets | Glob Gov | 5-Year Valuation (%) | 0.9 | 5-Year Systematic (%) | -1.4 | 10-Year Valuation (%) | 1.0 | 10-Year Systematic (%) | -1.2 |
Baskets | GlobGov xUS | 5-Year Valuation (%) | 1.4 | 5-Year Systematic (%) | -2.2 | 10-Year Valuation (%) | 1.5 | 10-Year Systematic (%) | -1.9 |
Baskets | Glob Credit | 5-Year Valuation (%) | 0.2 | 5-Year Systematic (%) | -0.3 | 10-Year Valuation (%) | 0.2 | 10-Year Systematic (%) | -0.2 |
Baskets | EMD Local | 5-Year Valuation (%) | 0.3 | 5-Year Systematic (%) | 2.1 | 10-Year Valuation (%) | -0.3 | 10-Year Systematic (%) | 1.9 |
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