1. According to Exhibit 1, were a significant number of portfolio managers consistently able to add value to international portfolios through active (selective) cur- rency management over the time period studied? Strategic currency hedging policy can be an important risk-control measure for funds with international assets. Passive currency exposure can be seen as a source of risk with no compensating risk premium. Hedging currency exposure removes return compo- nent that is a source of expected risk but not expected return. Leaving assets unhedged could be the correct policy decision, but it should not be the default posi- tion. The decision should be based on a systematic analysis of the costs and benefits of currency hedging. Given that currency adds risk, has zero expected excess return over long periods of time, and is rela- tively inexpensive to hedge, it is puzzling that the international investors' default position is not 100% hedged rather than the industry norm of 0% hedged. "Currency Management: Strategies to Add Alpha and Reduce Risk,"Andrew Dales and Richard Meese, Investment Insights, Barclays Global Investment, October 2003, Volume 6, Issue 7, p. 2.