SciVest Currency Hedging Program
Since the SGDI Strategy portfolios hold securities denominated in more than one currency, depending upon the base currency of any given SGDI Strategy portfolio, the value and returns of the SGDI Strategy portfolio (as measured in its base currency) may be subject to significant currency fluctuations. For example, Canadian dollar based currency SGDI Strategy portfolios generally hold more than half of their assets in US dollar denominated stocks, introducing the Canadian dollar base currency SGDI Strategy portfolios to CAD/USD foreign exchange rate fluctuations. Since the Canadian dollar based currency portfolio owns US dollar denominated stocks (i.e., also “owns” US dollars), if the US dollar goes down (up) by x% relative to the Canadian dollar, then the US dollar denominated stocks will go down (up) by x% as measured in Canadian dollars.
For qualified investors who elect to participate in the SciVest “Currency Hedging Program”, SciVest uses currency futures contracts and/or currency forwards within the SGDI Strategy portfolio to partially and passively hedge CAD/USD foreign exchange rates fluctuations within the SGDI Strategy portfolio. For example, in a Canadian dollar based currency GDI Strategy portfolio with say 75% exposure to the US dollar equities, SciVest will buy and hold CAD/USD futures/forward contracts (i.e., long CAD, short USD) representing approximately 75% of the value of the SGDI Strategy portfolio. In this manner, approximately every dollar lost (made) on currency moves priced into the US dollar equities will be made (lost) on currency moves priced into the futures contracts – that is, currency losses (gains) from the US equities will be offset by gains (losses) from the CAD/USD futures/forward contracts.