Criterion Investments Limited

Criterion Investments Limited

October 18, 2007 09:24 ET

New Evidence Reveals That Currency Adds Real Risk For Global Investors: Criterion Investments

TORONTO, ONTARIO--(Marketwire - Oct. 18, 2007) - Currency swings can wipe out significant potential returns and also add needless volatility for Canadian investors, says Toronto-based Criterion Investments Limited ("Criterion"), following new analysis of data from MSCI Inc. ("MSCI").

Currency ups and downs can damage returns

Over the past three years, a Canadian investor holding the MSCI World Index, a standard benchmark of global investing, without the benefit of currency hedging would have missed out on a total of 27% in returns, compared to a hedged investor holding the Index over the same period. That's a hefty price to pay for an easily-avoidable risk.

To view Hedged vs. unhedged Canadian investor in MSCI World Index
(The growth of $10,000 from Sep. 30, 2004 to Sep. 30, 2007), please visit the following link: http://www.ccnmatthews.com/docs/veng1018-hvsu.jpg

It's not just C$ vs. US$ - other world currencies play a major role

That 27% performance differential is not just because of the recent rise of the Canadian dollar to parity against the U.S. dollar. About a third of the MSCI World Index is comprised of North American holdings, with the remainder covering other regions, and consequently other currencies across the globe.

For example, taking the U.S. dollar out of the mix and looking at four other key global currencies - the Euro, Japanese Yen, Swiss Franc and British Pound, the average variability was 15.3% against the Canadian dollar over the one-year period ending September 30, 2007. A currency movement of that magnitude could easily wipe out returns for an unhedged investor trying to time their purchase or sale of foreign investments.

Hedged investor outperforms unhedged investor over last decade

Global equity returns are greatly impacted by fluctuating currencies. The following graph compares the rolling three-year performance of a currency-hedged investor in the MSCI World Index against the performance of an unhedged investor over the past 10 years. The hedged investor achieved superior returns more than 60% of the time.

Three-year performance numbers were used since that is the average holding period for Canadian mutual fund investors.

To view Rolling 3-year performance of hedged vs. unhedged investor in MSCI World Index (Jan. 1, 1997 to Sep. 30, 2007) please visit the following link: http://www.ccnmatthews.com/docs/veng1018-roll.jpg

"Most Canadians do not currency hedge their global investments, implicitly making an all-or-nothing bet that the Canadian dollar will not strengthen versus foreign exchange rates," says Ian McPherson, President of Criterion. "We do not believe that investors can accurately predict the direction of foreign exchange rates; consequently, it makes sense to hedge the currency exposure, eliminate the risk and avoid market timing.

"Canadians deserve to be compensated for the extra risk that currency exposure adds, but they're not. Most investors don't have the 20-25 years it can take for currency fluctuations to 'wash out', so it simply makes sense to take currency risk off the table. Think of currency hedging as inexpensive partial 'portfolio insurance,' which enables Canadians to participate in global markets without the added volatility of exchange rates," says McPherson.

Criterion offers innovative suite of currency-hedged solutions

Criterion has a diversified family of five currency-hedged global funds, providing Canadians with an opportunity to invest outside of Canada while taking changes in global currencies largely out of the mix. For example, Criterion Global Dividend Currency Hedged Fund is currently a top performer among its peers (mostly non-hedged), returning 8.7% year-to-date, 13.2% over one year and 13.4% since inception as at September 30, 2007.

Criterion this year launched Canada's first global clean energy fund and Canada's first actively-managed global water infrastructure fund - both available as currency-hedged solutions.

For more on the benefits of currency hedging, see the latest video on the Manager Insights (www.vengrowth.com/resources.asp?id=695) section at vengrowth.com.

About Criterion

Criterion is committed to creating insightful solutions for everyday Canadian investors, leveraging value-added investment features that are typically only available to large institutions and high-net worth individuals. Criterion combines unique investment structures with best-in-class asset managers or strategies to offer investors opportunities for access to exclusive asset classes, enhanced yield, tax efficiency and risk reduction. Criterion is an affiliate of VenGrowth Asset Management Inc., one of Canada's premier managers of private equity and alternative investments with a proven track record of success since 1982. For more information, please visit www.vengrowth.com.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus of the Criterion Funds before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all dividends and distributions and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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