That courage is not inconsistent with caution: Currency hedging for superannuation funds. The Economic Record

That courage is not inconsistent with caution: currency hedging for superannuation funds Surveys of Australian superannuation funds verify that most international bond holdings, but not equity holdings, are hedged for currency risk. We compare the mean-variance e ¢ ciency of this practice with two alternative strategies: a conventional forward hedge; and a selective hedge triggered by the sign of the interest di¤erential. These strategies produce optimal allocations which stochastically dominate the restricted portfolio according to Barrett-Donald (2003) tests. The advantages of alternative hedging strategies remain when the vector of sample mean returns is replaced by forecasts. Selective hedging works best for equities; conventional hedging for bonds. Adding unhedged bonds does not improve outcomes