Someone stated in another thread that most foreign equity mutual funds are not currency hedged. But if this is the case, why has the performance of those funds not been better over the last year for American investors? For example, Vanguard has a fund based on the "FTSE All-World Ex-US" Index. The etf symbol is VEU and compared to one year ago, the price is almost exactly the same (~$53). There was one small dividend. If I go to the UK version of the FT website and look up the actual index, it reports similar results for the same time period (started and ended at ~297). So the returns for both the index and the ETF based on it appear almost identical.
BUT, over that same time period, the foreign currencies that denominate the stocks in the index have greatly appreciated. Based on the geographic distribution given by vanguard, most of the holdings are in: Europe (Euro +15%), Japan (Yen +15%), UK (GBP +1%), Australia (AU +13%), Canada (CAD +12%), Switzerland (CHF +20%). So if you take a weighted average of all those, the foreign currency gains to the US investor should've been at least 10%, but instead we didn't get any at all.
Other than concluding that Vanguard is hedging the currency exposure of its international funds, how else can you explain this?
BUT, over that same time period, the foreign currencies that denominate the stocks in the index have greatly appreciated. Based on the geographic distribution given by vanguard, most of the holdings are in: Europe (Euro +15%), Japan (Yen +15%), UK (GBP +1%), Australia (AU +13%), Canada (CAD +12%), Switzerland (CHF +20%). So if you take a weighted average of all those, the foreign currency gains to the US investor should've been at least 10%, but instead we didn't get any at all.
Other than concluding that Vanguard is hedging the currency exposure of its international funds, how else can you explain this?