UK Fund Managers Increase Currency Hedging

UK fund managers are increasingly hedging against currency risk, with 88% reporting they hedge their investments in 2024, up from 75% in 2023, due to heightened market volatility. The costs of hedging have also risen, with 84% of managers indicating they have faced higher expenses, primarily driven by the dynamics of the options market. The pound's fluctuations, reaching a low of $1.2296 and a high of $1.3384 within the year, have prompted 89% of fund managers to recognize its impact on their returns. Despite the rising costs, only about 6% hedge more than 75% of their portfolios, reflecting a cautious approach. UK fund managers are also found to hedge 9% more than their US counterparts, highlighting a strategic focus on risk management amidst uncertainty. Overall, the trend underscores the necessity for reassessing risk management strategies in light of persistent currency volatility.