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In the following figure, the total attributed value is 0.255%. This is the excess return or the value added by active portfolio management. It is the sum of the currency selection, market selection, and security selection effects.
The market selection effect also measures the impact of decisions to overweight or underweight particular asset segments relative to the benchmark. In the following figure, a positive market selection effect resulted from overweighting countries that produced greater returns than the benchmark average. However, a negative currency selection effect resulted from the currency exposure that came along with those weights.
The Karnosky-Singer attribution provides a true separation between the effects of the market decisions and currency decisions.

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Example 2: Synthetic Hedging

If you have a separate currency manager creating an overlay to adjust currency exposure, you can simulate the resulting currency exposure using one of three synthetic hedging options. You cannot have hedging instruments within your portfolio if you choose one of the synthetic currency hedging options. However, you can have hedging instruments within your portfolio if you are not hedging synthetically.

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