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Is it time for investors to start hedging their international portfolios?

ended 23. May 2025

One wealth manager, Faisal Sheikh, Managing Director at Monmouth Capital, has said he is reassessing his approach to investment portfolios carrying international equities and will start hedging them as he believes the dollar's safe haven status is under threat: “Our default was to leave international equity investments in client portfolios unhedged, namely exposed to currency movement. But this is going to change.”

But others were not so sure. Scott Gallacher, Director at Rowley Turton commented: “Currency movements are always a factor in investing, especially with a well-diversified portfolio, where the majority is typically held outside the UK. However, I’d be cautious about trying to hedge out that currency risk. In doing so, you're effectively taking an active position on the future strength of the Pound, which is beyond our core expertise. Many of the underlying international companies are already trading across multiple markets and currencies — and may be running their own hedging strategies. That makes it very difficult to know how an investor’s personal hedging will interact with what’s already being done at the corporate level. While there are growing concerns about the long-term dominance of the US dollar, we also need to ask: given the UK’s structural economic challenges, do we really want to place a long-term bet on a strengthening Pound? So far, no clients have raised this issue with us — and for now, we remain cautious about making currency calls for clients.”

Newspage asked IFAs, traders and forex experts for their views on whether investors now need to consider hedging, below.

5 responses from the Newspage community

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Scott Gallacher
Director at Rowley Turton
Currency movements are always a factor in investing, especially with a well-diversified portfolio, where the majority is typically held outside the UK. However, I’d be cautious about trying to hedge out that currency risk. In doing so, you're effectively taking an active position on the future strength of the Pound, which is beyond our core expertise. Many of the underlying international companies are already trading across multiple markets and currencies — and may be running their own hedging strategies. That makes it very difficult to know how an investor’s personal hedging will interact with what’s already being done at the corporate level. While there are growing concerns about the long-term dominance of the US dollar, we also need to ask: given the UK’s structural economic challenges, do we really want to place a long-term bet on a strengthening Pound? So far, no clients have raised this issue with us — and for now, we remain cautious about making currency calls for clients.
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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
This is a difficult one to call. The dollar is historically strong, and so some pull back is to be expected. Trump's policies could actually strengthen the dollar. On the other hand, there is a narrative forming that the dollar is losing its safe haven status. There’s no ready made replacement for it and so I don’t think anything fundamentally changes. The US economy is likely to remain stronger than the UK economy, giving a boost to the dollar. The shorter term exchange rate may be volatile, but the longer-term trend of the dollar appreciating versus sterling still seems reasonable. Hedging adds cost and isn’t always straight forward. Do you hedge absolutely or do you hedge tactically? Is the manager any good at tactical currency trades? Fixed income tends to be hedged, as the thinner margins and more predictable cash flows make it an easier process. Equities are more unpredicatable and so it's harder. Whilst nothing lasts forever, I don’t see an immediate need to change.
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Tony Redondo
Founder at Cosmos Currency Exchange
Sterling’s surge to a 39-month high this week is a new wake-up call for UK investors as it dents UK private investors with dollar-heavy portfolios. $1 million in US assets now yields 7.6% less Sterling than it did at the start of the year. Historically, the pound’s long-term weakening has cushioned UK investors, especially during crises when the dollar’s safe-haven status kicks in. But a structural shift away from the dollar, driven by a 9.7% drop in the value of the Dollar index in 2025 and de-dollarization trends like BRICS’ payment initiatives, raises red flags. Some of my investor clients are adopting a mixed approach by buying unhedged global equities for long-term diversification with hedged share classes for bonds to curb volatility. Post-Liberation Day, with Trump’s tariffs also threatening long-held trade patterns, I’ve been working on currency hedges with my business clients with import and export businesses.
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Faisal Sheikh
Managing Director at Monmouth Capital
Our default was to leave international equity investments in client portfolios unhedged, namely exposed to currency movement. But this is going to change. The pound's gradual decline since WW2 has given UK-based investors in foreign assets a tailwind. And on top of that, the role of the US dollar as a safe haven asset has proven especially helpful in times of crisis. For instance, during the crash of 2007-09, the pound fell 20%-30% against USD. This was a boon for unhedged UK investors in US equities. As the S&P 500 US stock index fell by more than 50% from the start of 2007 to the bottom in March 2009, UK investors who held the index also suffered – but, translated back to Sterling, they only saw a fall of around 33%. However, the extraordinary uncertainty unleashed by American policy since “Liberation Day”, when President Trump announced tariffs which have since been revised, delayed, withdrawn and reinstated, sometimes within days, might have ended this safe haven effect forever.
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David Belle
Founder and Trader at Fink Money
I do not agree there is mounting evidence of a structural shift away from the US dollar right now. Non-US investors have bought US assets at the largest amount ever, which is not a bad thing. It means the US has the best companies to invest in. Would you argue with that? Your Apples, Nvidias, Teslas et al are in zero competition with... Greggs or Rheinmetall in Germany or any other European large cap. And if you are invested in the SP500, you are going to be invested in a sterling denominated ETF since retail cannot really access the US ETFs. We tend to say 'hedging is for gardens'. For corporates focusing on their FX flows or portfolios of monumental size that do not wish to be hugely adversely affected by fx shifts or volatility which would affect their Sharpe Ratio, hedging can be a useful tool, but for retail investors it just implies higher costs which most want to avoid.