Hedged share class

Definition

A hedged share class is a share class that aims to remove most of the currency risk between the assets the fund holds and the currency the class is denominated in. A EUR-hedged class of a US equity fund sells US dollars forward against euros, typically rolling one-month contracts, so that a fall in the dollar does not reduce the euro value of the holdings. Fund names flag it with "Hedged", "H" or "(EUR Hedged)", and each hedged class has its own ISIN.

Why it matters

Currency moves can dominate short-term returns for investors buying foreign-currency assets. Hedging trades that risk for a cost roughly equal to the interest-rate differential between the two currencies plus transaction costs, which can be positive or negative. Hedged and unhedged classes of the same fund therefore show different returns, volatility and even different risk indicators in their KIDs.

In the API

The class label in shareClass states whether the class is hedged and the denomination is in keyFacts.currency. Example values:

json
{
  "shareClass": "EUR Hedged Acc",
  "keyFacts": { "currency": "EUR", "distribution": "Accumulating" },
  "headlineMetrics": { "volatility3y": 15.8 }
}

Common pitfalls

A share class denominated in euros is not automatically hedged; an unhedged EUR class of a USD fund simply converts the NAV and carries full currency exposure. Hedging is never perfect: intra-month flows and market moves leave a residual. Performance comparisons between hedged and unhedged classes are only meaningful in the context of the currency pair over the period.