Miller asked whether a super fund could afford to have a currency hedge which was radically different to its peers.

“We find that peer considerations push organizations to have a greater hedging position than they otherwise would have,” he said.

The currency hedging decision is often the most difficult for an investment committee or consultant to put to a board because of its binary nature – you can plainly see at the end of the year whether or not your decision was correct. As a result, many funds opt for a 50:50 hedge ratio to, rightly or wrongly, avoid regret.

In terms of short-to-medium-term opportunities, Watson Wyatt believes that emerging market currencies are undervalued compared with developed market currencies.

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