Previously, offshore currency exposures within the fund were unhedged. Effective Feb. 14, 2012, the fund manager (RARE Infrastructure) may elect to adjust the fund’s emerging-markets currency positioning through the use of short-term (i.e. generally less than six months) forward foreign exchange and other derivative contracts. The hedging decisions will be made by the emerging-markets portfolio-management team, comprising Richard Elmslie, Nick Langley, and Charles Hamieh, and executed by trader, Tim Snelgrove.

The change will not result in emerging-market currency exposures being hedged back to A$ or any other developed-market currencies. Rather, it will provide RARE with the flexibility to reduce exposure to single emerging-market currencies without the need to sell underlying securities. We view this as being consistent with the manager’s predominantly bottom-up investment approach.

While this change has the potential to reduce single-currency exposure, as well as the volatility of capital returns, a side effect may be a more volatile dividend/income profile. This will depend on the extent and duration of currency hedging, as well as currency market volatility.

The post RARE Emerging Markets Infrastructure Fund rating unaffected after hedging change appeared first on AdviserVoice.