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Tapping Model Portfolios to Mitigate Currency Risk

With the dollar weakening, hedging risk may not be the top priority for many advisors, but that doesn’t mean that risk is off the table.

The right strategies, such as the Developed International Model Portfolio, which is part of WisdomTree’s Modern Alpha lineup of model portfolios, can help advisors properly position equity sleeves for clients seeking reduced currency risk.

“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Developed International equities primarily using factor focused ETFs,” according to WisdomTree. “The selected ETFs provide certain factor tilts that have the potential to generate excess return relative to comparable cap-weighted benchmarks over longer-term holding periods. The strategies may use both WisdomTree and non-WisdomTree ETFs.”

Historical data confirm ignoring currency fluctuations introduces another layer of risk to portfolios.

“The reality is that unhedged international strategies carry a second layer of risk and exposure

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