Global Bond Strategies and Currency Hedging
(A Historical Analysis, 1973-1997)

Wesley Phoa, Ph.D.

This paper conducts efficient frontier analysis of global bond portfolios using data drawn from the 1970s, 1980s and 1990s. Although the specific results vary with the time period analysed, the following robust conclusions can be drawn: global diversification adds value; currency hedging adds value; and the optimal passive allocation is a hedged, GDP-weighted global bond index. An unhedged global bond index never lies on the efficient frontier.