Reuters excerpts.
"Once a source of rich returns for yield-hungry investors, emerging markets are hammering home a long-ignored truism: banking on currency strength to enhance returns on stocks and bonds is not a one-way ticket to profits''.
"Currencies such as the rupiah and lira have slumped 10-20 percent this year as a seismic shift in global capital flows rattles even relatively robust markets, exacerbating international investors' losses on the underlying assets.
And as a long-term dollar uptrend gains momentum, fund managers are being forced to rethink their decade-long view of emerging currencies as an obviously strong bet.
That means having to start actively managing exchange rate risk - and the cost of hedging may well make the underlying investment look far less attractive".
"We'll take currency exposure where we think there's upside potential. But equally we have the flexibility to own the bond without owning the currency, or even being short the currency," Goldman Sachs Asset Management's EMEA CEO Andrew Wilson said.
Source: Reuters
