Why doesn’t the CPPIB use a currency hedging strategy to protect foreign investment gains from a strong Canadian dollar?
We maintain a strategic unhedged exposure to foreign currencies in the portfolio based on our belief that over the long term the cost of currency hedging outweighs the potential benefits. An unhedged foreign exposure helps to offset increases in CPP liabilities due to inflation. The foreign emerging market equity component in our Reference Portfolio benchmark is an inherent hedge against a decline in the Canadian dollar. We have 43.1 per cent of the fund or $53.4 billion invested in Canada, which is an implicit hedge against the losses we may experience when the dollar strengthens against our foreign assets denominated in foreign currencies.
We maintain a strategic unhedged exposure to foreign currencies in the portfolio based on our belief that over the long term the cost of currency hedging outweighs the potential benefits. An unhedged foreign exposure helps to offset increases in CPP liabilities due to inflation. The foreign equity component in our Reference Portfolio benchmark is an inherent hedge against a decline in the Canadian dollar. We have 53 per cent of the fund or $65.1 billion invested in Canada, which is an implicit hedge against the losses we may experience when the dollar strengthens against our foreign assets denominated in foreign currencies.
