Currency hedging is a governance decision

Hedging ratios are often set once, at the start of a mandate, and then left alone for years. That is a governance gap rather than a modelling choice.

Why ratios drift

A 50% hedge was calibrated to a portfolio that has since changed shape. When the asset mix moves, the unhedged exposure moves with it, and nobody re-runs the decision.

Put it in the policy statement

State the hedge ratio, the rationale, the cost budget, and a review trigger — a move in rate differentials, a change in the spending currency, or a shift in the asset mix beyond a stated band.

Cost is part of the decision

Forward points are not a rounding error over a decade. The hedge decision should be evaluated on the same horizon as the investment thesis, not on the current quarter's carry.

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