Currency hedging: When one size doesn’t fit all

Pictet’s Maria Vassalou examines how currency hedging should vary across asset classes, reference currencies and market conditions rather than follow fixed rules.

• Dynamic minimum-variance hedging outperformed static approaches in many cases, particularly across multi-currency and multi-asset portfolios.
• Optimal hedge ratios can vary widely over time and may even exceed 100%, depending on correlations, volatility, monetary policy and safe-haven effects.
• Traditional rules such as “0% for equities, 100% for bonds” can be too simplistic, as currency exposure affects both risk and expected returns.

Explore the full report to see how flexible hedging can be integrated into broader portfolio construction.