A new study reveals foreign bond funds have outperformed other international funds by not using currency hedging strategies, The Wall Street Journal reports. Ever since the dollar began to weaken in 2002, a number of international funds have tried such a hedging strategy. The revelation comes as a blow to some investors who have pursued international bond funds offering the security of currency hedging provisions.
The newly released study by Lipper Inc . further shows that shareholders often lack the necessary information to choose between funds offering hedging strategies and others that take a chance on market forces, because many funds either downplay or fail to completely disclose currency hedging strategies in annual prospectuses and other documents targeting shareholders.