How are y’all hedging against EUR/USD risk associated with GV? Seems like a sweet discount right now to purchase GV, but will it go down further? Do you buy 5 year futures to hedge risk? Are there cheaper alternatives?
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Hedging using financial instruments is expensive. You can get a sense of the costs by looking at options prices for 6E futures on the merc or FXE equity.
I happen to be hedged using 6E futures options. My original plan was to just run a 5% collar every year to guard against massive moves. I got some emotional comfort from it but it’s unclear that it’s worth it either and I haven’t decided yet whether to drop them - they’re obviously quite positive at the moment and actually expired in the money into the underlying futures but that doesn’t mean it makes sense long term.
Right now, hedging out to mar 2024 (a mere 2yr) at the money costs around 3%. Is that worth it? maybe. That’s not that bad, if you think about it, I guess. But … are you concerned about return on capital or return of capital?
TANSTAAFL.
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I had some hedge on and admittedly still trade it around a little. I just shorted EURUSD on a currency platform, for the most part, but also used some FXE options.
Generally speaking, if you made a golden visa investment, you probably have a significant probability that you will live in Europe one day….and spend Euros. The investment itself is a hedge for that future expense stream. For most GV investors, I believe leaving the long Euro exposure in the investment is probably the correct decision.
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