Managed Funds Hedged Intl. Managed funds worse!?

Discussion in 'Shares & Funds' started by PennyWise, 16th Aug, 2015.

Join Australia's most dynamic and respected property investment community
  1. PennyWise

    PennyWise Active Member

    Joined:
    1st Jul, 2015
    Posts:
    26
    Location:
    Sydney
    I always understood that Managed funds that are Hedged are supposed be better for Intl. managed fund investments in order to smooth out currency variations etc!

    After just receiving NO distribution for 2014/15 and only single digit annual gains on two Vanguard funds ( Intl Prop Sec Index Fd Hedged & Intl Shares Index Fund Hedged) whilst the same funds which are un-hedged scored double digit gains and distributions to boot it seems they can be a lot worse!!

    Anyone have any input or know why this would be so?

    Cheers,

    PW
     
    PennyWise, 16th Aug, 2015
    #1
  2. Tropo

    Tropo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    2,303
    Location:
    NSW
    Tropo, 16th Aug, 2015
    #2
  3. PennyWise

    PennyWise Active Member

    Joined:
    1st Jul, 2015
    Posts:
    26
    Location:
    Sydney
    Interesting read but they are the wrong/bad type of hedge funds!

    Vanguard are Index fund managers and the hedging is only for currency to minimise and protect against A$ fluctuations!

    So doesn't really make sense that these funds performed so badly when compared to their identical albeit unhedged twins?

    Anyone?

    Cheers

    PW
     
    PennyWise, 16th Aug, 2015
    #3
  4. Tropo

    Tropo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    2,303
    Location:
    NSW
    Tropo, 16th Aug, 2015
    #4
  5. jabba_jones

    jabba_jones Active Member

    Joined:
    1st Jul, 2015
    Posts:
    43
    Location:
    Sydney
    Without knowing too much about the Vanguard funds in question... I don't see these as 'Hedge Funds' but passive funds that have a hedge overlay.

    The Aussie dollar has fallen approx 20c against the USD (~ 95c June 2014 - ~ 75c June 2015). A fully hedged fund will have generated an equivalent FX loss. However your assets are worth more now if you sold them and converted them back to AUD at the current exchange rate.

    The MSCI World Ex AU on a simplified basis is about ~ 65% USD, so the fund would of generated a sizable FX loss which would offset any income.

    Looking at a Vanguard Fund fact sheet for July, the fund still has returned 14.88%. It's just all in growth rather than in the form of income.

    Looks to me like the fund has achieved its objective of matching or beating the MSCI World Ex Aus.

    If you want to look into it more I suggest you ask for a copy of their financial statements which will break down the moving parts.
     
    Last edited by a moderator: 17th Aug, 2015
    jabba_jones, 17th Aug, 2015
    #5
Buy Property Interstate WITHOUT Buyers Agents!

Buy Property Interstate WITHOUT Dropping $15k On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia