The decision whether or not to hedge can prove troublesome for investors and gardeners alike.

But we have come across some research, which suggests domestic investors hedging against the US dollar in portfolios would have faced a performance drag more often than not over the past 20 years. 

Asset Risk Consultants found sterling has weakened against the dollar by 25 per cent over 20 years, meaning those DFMs who adopted a systematic hedging policy would have had their losses exacerbated during times of global equity market stress. 

"The empirical evidence suggests that systematic hedging of foreign equity exposure has not reduced downside volatility for sterling-based investors.

"Overweighting UK equities has provided limited long-term benefits,” said Arc chair Graham Harrison. 

That does not stop DFMs from doing it, though – their findings evidenced that 65 per cent of those allocators surveyed use currency hedging in their solutions across all asset classes.

In equities, 25 per cent of their DFMs hedge their non-UK exposure consistently. 

Earlier this year we spoke to Eren Osman, managing director at Arbuthnot Latham, who warned that sterling in itself is a risk and investors should diversify their exposure away from it.

“I think there's a misconception that if you're investing globally, you're taking on currency risk,” he said. “My view is the other way around. If you're not investing overseas, you're taking on currency risk.”

This is perhaps why Arbuthnot's UK equities exposure hovers around just 6 per cent when compared to the Asset Allocator database average of just below 13 per cent.