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August 23, 2017 - Articles
Hedge Reduced for Counsel Retirement Income Portfolio

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CURRENCY HEDGE REDUCED FOR COUNSEL RETIREMENT INCOME PORTFOLIO

The Portfolio Management Team lowered the currency hedge position on the U.S. dollar exposure for Counsel Retirement Income Portfolio from 90% to 50% in mid-July. This is consistent with the hedging strategy across all Counsel investment solutions.

The decision was based on the technical signals that the team monitors, which showed that the Canadian dollar had strengthened relative to the U.S. dollar to a point where it was trading significantly above both the longer-term and midterm moving averages. This indicates the likelihood that the trend for the Canadian dollar will reverse and fall relative to the U.S. dollar has now increased.

Why this matters to you and your portfolio
Currency risk can have a significant impact on the value of your overall portfolio. Through hedging, we help smooth out this impact. In short, a falling Canadian dollar (relative to the U.S. dollar) increases the value of your U.S. investments, while a rising Canadian dollar reduces the value. We hedge the U.S. dollar exposure as it is typically the largest component of currency risk in your portfolio.

The Canadian dollar traded well above the longer-term and mid-term moving averages, signaling that a lower hedge position will allow investors to benefit from a potential increase in the value of their U.S. dollar investments.

How this benefits you
Our portfolio management team monitors the movement of the Canadian dollar against the U.S. dollar carefully and adjusts how much of your portfolio is hedged. The goal is to minimize the risk of currency fluctuations in your portfolio. So, if the Canadian dollar shows signs of getting stronger relative to the U.S. dollar, we may turn on, or increase our currency hedge strategy to protect the value of investments in U.S. dollars. Conversely, if the Canadian dollar shows signs of weakness, the team may reduce or remove the hedge so that investors can benefit from an increase in the value of their U.S. dollar investments. At this time, the team is comfortable with a 50% hedge position, however, should the Canadian dollar continue to fall, our currency hedge may be reduced further. Currency risk protection is just one of many value added investment management services that we offer to help you achieve your investment goals.

 

To find out more about our currency hedge strategy, or to understand how this strategy can benefit you, speak with your financial advisor.

 

 

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