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Vanguard FTSE Developed All Cap Ex U.S. Index ETF (VDU)
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Vanguard FTSE Developed All Cap Ex U.S. Index ETF (CAD-hedged) (VEF)
Q: Hi
You recently suggested VEF for international exposure . This is the hedged ETF which I gather from past questions you don't really favor hedging. Could you explain why and when you would hedge and is there an alternative unhedged version of VEF?
Thanks
Jeff
You recently suggested VEF for international exposure . This is the hedged ETF which I gather from past questions you don't really favor hedging. Could you explain why and when you would hedge and is there an alternative unhedged version of VEF?
Thanks
Jeff
5i Research Answer:
VEF is a global fund with no US exposure with multiple currency exposures. Generally, we view currency as another form of diversification. There are, however, not many solid global, ex-US funds that are liquid and cheap that trade in Canada. VDU is the main other alternative. The decision to hedge is really a call on currencies. We generally assume that currencies are impossible to predict so that is also a reason not to hedge. With the two funds above, one needs to predict the direction of at least 10 different currencies. We would be happy with either fund. If one believes the C$ is going to see a period of strength, then it does make sense to hedge.