The recent movement in the world oil price may be temporary, but it has certainly made a positive impact on the Norwegian Krone. For those invested in global funds however, it means that the value of their foreign assets have become slightly less worth. To mitigate this, investors have the possibility to do a currency hedge. This will omit any direct currency movement from your performance and keep your financial assets intact. At Arctic, you have the possibility of investing in our NOK hedged funds at no extra cost.
Since the hay days of the oil price in 2011, the Norwegian Krone (NOK) fell more than 30% in value against the Euro. This was a positive journey to be experienced by any Scandinavian investor with investments placed abroad. With a record level weak currency, however, it was a question of time before the NOK would regain some if its strength. The reversal started to materialize in the very beginning of this year.
Since January, the EURNOK has fallen about 8%. The strengthening of the Norwegian Krone against the Euro is by in large viewed as a favorable revival in the eyes of Norwegians. Foreign goods have become cheaper and the cost of travel has fallen. However, the general direction of the NOK is this time around hurtful for any financial investments placed outside the borders of, in this instance, Norway.
In addition to Norwegian and Nordic equity and fixed income products that are already invested in the NOK, Arctic Fund Management has two funds that are exposed to the global equity market whom also have a share class hedged to the NOK. The outperformance of these funds are not negligible. Arctic Aurora LifeScience and Arctic Global hedged NOK funds have both an outperformance of 5 – 7 % year to date compared to their respective NOK denominated funds.
The significant drop of the Norwegian Krone along with the fall of the oil price, saw large positive impacts on performance for domestic investors. At some point, the drop in the NOK became too much and a reversal to a more normalized level started. Most foreign exchange forecasts predicts a stronger NOK in the 1-2 years to come. A hedged NOK investment may be a preferable strategy for investors that want to keep their performance intact, regardless of currency movements.
Please contact us at firstname.lastname@example.org for any questions or reach out to any member of Arctic’s Business Development team