When it comes to your equity investments, concentrate solely on the markets themselves: With the currency-hedged UBS ETFs based on equity indices, you hedge your portfolio against exchange rate fluctuations – cost-effectively, efficiently and transparently.
What is currency hedging and what are the benefits of UBS Currency Hedge?
Currency hedging is the forward sale or purchase of a foreign currency, thus reducing the exchange risk exposure connected with assets or liabilities denominated in a foreign currency. Fluctuating exchange rates can impact returns on foreign investments which is why UBS offer currency hedging to investors wanting to reduce exchange rate risk and optimize return opportunities.
A wide selection of benefits are enjoyed by the UBS ETF investor. Currency hedging with UBS allows cost efficient access to currency hedged indices. With the potential to hedge our portfolios in four different currencies, UBS Asset Management offers investors the widest range of currency-hedged ETFs in Europe*.
Exchange rate fluctuations have many causes, whether central banks' monetary policy, external trade imbalances or unexpected political changes. In difficult phases in particular, these fluctuations can can drive either profits or losses on stock markets.
With UBS ETFs, however, investors can concentrate completely on their equity strategies – UBS Asset Management offers you a wide range of physically replicated ETFs based on equity indices with currency hedging. This transparent currency hedging strategy helps you to reduce exchange rate risk and optimize your return opportunities.
Source: Bloomberg, 13 May 2014. Performance based on the period: 31.03.2009 – 31.03.2014
This example illustrates just how significantly currency fluctuations can impact returns: Calculated in Japanese yen (JPY), the MSCI Japan Index generated a return of 11.28% p.a. between March 2009 and March 2014. Due to exchange rate losses against the franc (CHF), however, Swiss investors only saw a return of 4.90% p.a. With currency hedging in CHF, the annualized return was 9.28%, almost twice as high.
With UBS ETFs, investors can hedge their portfolio in four currencies: Swiss francs (CHF), euros (EUR), US dollars (USD) and the pound sterling (GBP). The currency-hedged ETFs offer access to the equity markets in the Eurozone, the US, Switzerland, Japan, Australia and Canada. This allows UBS Asset Management to offer investors the widest range of currency-hedged ETFs in Europe.*
UBS ETFs hedge the foreign currencies of the replicated indices by selling foreign currency forwards at the one-month forward rate. The sum of the sold forwards as at the last trading day of the month corresponds to the market capitalization weighting of the equities contained in the index. These securities are valued in the respective currency two trading days before the first calendar day of the following month. The amount hedged remains constant over the entire month.
The overall return of a currency-hedged UBS ETF therefore comprises two components:
The return of the non-currency-hedged index in the selected reference currency.
The profit or loss arising from the forward contract in the selected reference currency