The (H) on a fund's name — when hedging helps and when it costs
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Invest abroad and your return has two sources: the asset and the exchange rate. An (H) removes one of them.
Without a hedge, the currency comes along
Buy a US equity fund in won. If US stocks gain 10% and the won weakens 5% against the dollar, your return in won is roughly 15%.
It cuts both ways. A 10% gain with a 10% currency move against you leaves almost nothing. Being right about the asset does not settle the outcome.
An unhedged fund carries both exposures together.
(H) cuts the currency out
A hedged share class uses forwards or futures to offset currency moves, leaving the return to follow the underlying asset alone.
That helps when your home currency strengthens: what the asset earned is not handed back through the exchange rate.
It costs you when your home currency weakens, since you gave up the gain the move would have produced.
Hedging is not free
Maintaining a hedge has a price, set largely by the interest-rate gap between the two currencies. Where your home rate is the lower one, holding the hedge costs money.
That drag comes out of returns separately from the expense ratio, and in periods of wide rate gaps it is not trivial.
So "hedge everything, currencies are risky" is not automatically the better choice.
Choosing between them
Hedged suits a strengthening home currency, unhedged a weakening one — though calling exchange rates is about as hard as calling stocks.
Splitting by horizon is more practical. For shorter-dated money, removing the currency makes the outcome simpler to judge; for money left for years, the hedging cost accumulates and unhedged is usually the easier default.
And if you hold foreign assets partly to diversify, leaving them unhedged is the point — the diversification comes from the currency moving.
This article is general information, not investment advice. Investment decisions and responsibility are your own.