Coffee Meets Investing
Asked by Anonymous
Asked on 07 Jul 2018
At present moment, FX hedging is very costly especially for portfolios below S$1m in size. We do not foresee FX hedging cost reducing to a cost-efficient level over the next few years.
As and when hedging cost significantly reduces to a cost-efficient level, we will be more than happy to offer FX hedging option to our clients.
You may also note that USD and SGD are major currencies and they tend to be relatively more stable compared to other emerging markets currencies.
Therefore, while FX risk is material, FX risk is not significant. This is especially so for investors who have a medium to long term investment horizon. For example, the AutoWealth Balanced Portfolio (60% stocks, 40% govt bonds) achieved 15.7% returns net of fees on a USD basis over the last 26 months since inception. The same portfolio achieved 16.4% net of fees on a SGD basis over the same period. Therefore, the difference of 0.7% due to FX impact is relatively small.