Pension plans, endowments, and foundations allocate a significant portion of their total portfolio to foreign assets in both developed and emerging markets. In a recent study of institutional investment strategies, the J.P. Morgan Investment Analytics and Consulting group found that U.S. investors, on average, have targeted a 20% allocation to international investments. This sizeable allocation, if left un-hedged, has benefited from the weakness in the U.S. Dollar over the last several years. For the most recent year, the gain on currency has helped bolster these international equity returns by an estimated 9.64% (see Exhibit 1). Even longer term, the currency gains as a proportion of the total international return has been significant.
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