Solving The Challenge Of EM FX

EMMF Currency Positioning

Markets are, by definition, dynamic. This is also the reason why we seek to adjust our FX hedges multiple times per month based on our model. In the chart below, we show EMMF’s FX positioning over time. As downside EM FX momentum began to stall, our dynamic approach to FX risk gradually reduced our hedges. In the second week of January, EMMF was currently 100% long EM FX.

EMMF Currency Hedging, 8/10/18–1/17/19

EMMF Currency Hedging 81018-11719

 

While active management has generally focused on security selection, we believe investors should continue to probe the decisions managers are making regarding FX risk. Through our dynamic approach, we believe we’ve identified a way to add value that helps solve the challenge that currency risk plays in emerging market portfolios.

Unless otherwise stated, all data is from Bloomberg as of December 31, 2018.

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