The currency is one of the most unknown financial concepts of investment funds. Or, at least, it is not the first thing that investors look at when choosing one investment vehicle or another. The type of asset (fixed income, variable, monetary), the theme (,…) are priorities, while the currency often takes a back seat.
A supporting actor role that sometimes obscures the importance of subscribing to a fund in one currency or another. Without going any further, unit-holders should be aware that the currency in which the fund invests and the currency in which the product is denominated may be different: the fund buys US shares in dollars and their net asset value is instead calculated in another currency, like the euro, for example.
A fund that invests in US stocks will be affected by the evolution of the price of the dollar against the euro, regardless of whether the product is denominated in euros or dollars. The currency in which the fund is denominated matters because subscriptions (trades) and redemptions (investment recovery) are made in that currency.
In this way, there are three options to invest in products with exposure to other markets, highlights MyInvestor: funds denominated in the currency of the country (euros, in the Spanish case), funds denominated in a currency other than the euro and funds with currency hedges. (for investors who want to opt for their own currency and without the profitability of the investment vehicle being constantly affected by the currency exchange). This last case implies that the fund invests part of its assets in financial derivatives that protect it from the currency effect.
But, to the previous ones, we must add an option that in recent years has gained weight thanks to trading: investment in Forex (foreign exchange, currency in English).
Investing in forex usually carries more risk than other investment assets. One of the trends in recent months is the dollar effect: the US currency has appreciated. Individuals who invest in assets denominated in dollars, such as shares of North American technology companies on the Nasdaq, will benefit from the exchange rate by reimbursing the investment in euros.
The way of allows them to bet on this type of asset in a more diversified way, combining stronger and more stable currencies (dollar, euro or pound) with other emerging ones and with a greater potential to appreciate (Mexican peso, Brazilian real…).
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Currency investment funds
Finect collects a selection of on its website. They are funds that invest in various currencies through short-term monetary instruments, derivatives and deposits.
However, there are options for conservative investors who want to put money aside. This is the case of the fund, a fund denominated in dollars and contracted in several European countries, including Spain. It belongs to the Morningstar currency category, offers this year a return of 5% and has a risk level of 2 out of 7 on a scale where 1 is the lowest risk and 7 the highest. It has been favored by the appreciation of the dollar during the first quarter of 2022, the reference currency in the financial markets and which has traditionally acted as in times of volatility.
A currency fund for moderate profiles, run by a benchmark manager in Europe such as Amundi, is (risk level 3 out of 7). It invests at least 67% of its total assets in currencies (forward currency futures, currency swaps, currency options…) and debt instruments issued or listed on regulated markets in any OECD country. This year it brings the investor positive returns of 1.53%, although in the medium term it accumulates a 3-year annualized return of -1.6%.
Finally, alternatives for riskier investors include products like . This vehicle of the manager belonging to the well-known Swiss bank is an actively managed fund that invests in currencies from developed and emerging markets, mainly with derivatives. The management team tries to locate the opportunities that arise from the devaluation of currencies, regardless of the direction that the market takes, according to the technical sheet. It accumulates an 8% return in 2022 and positive annualized returns at one year and two years.
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