The FTSE WPU is produced in consultation with US currency firm Mountain Pacific Group and, as Gunthorp sees it, offers Australian investors a much more efficient way to manage global exchange rate risk – without hitching everything on the local dollar.
“Hedging all exposure into the home currency violates the basic principle of diversification and exposes a fund to significant local risk – be it political or economic,” he says. “Passive hedging into FTSE WPU prevents the forced active management of currency by a fund or the forced reaction to currency crisis by undertaking potentially destabilising hedging activities.”
Gresham’s Johnson, for one, is excited about the FTSE WPU’s potential for Australian investors. “The FTSE WPU looks like a good global proxy and it will be interesting to see how it develops over time.”
Article contributed by FTSE Group
