Investment funds' de facto currency risk exposure

Inês Lindoso, Andreas Schrimpf, Vladyslav Sushko and Toma Tomov

No 123, BIS Bulletins from Bank for International Settlements

Abstract: The sensitivity of fund returns to exchange rates, once underlying asset returns are accounted for, provides a measure of funds' exposure to currency risk, ie their de facto hedge ratio. Bond funds have high and stable hedge ratios, though with some sensitivity to hedging costs. Equity funds' hedging is volatile and consistent with opportunistic currency speculation. In the run-up to April 2025, equity funds with low hedge ratios attracted most inflows and outperformed those with high hedge ratios, but this relation flipped following "Liberation Day".

Pages: 8 pages
Date: 2026-04-22
New Economics Papers: this item is included in nep-ifn
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bis.org/publ/bisbull123.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/bisbull123.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:bisblt:123

Access Statistics for this paper

More papers in BIS Bulletins from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().