What are "hedging" costs?

Question

Also, what are "currency" costs?

Answer 1

Hedging is an investment strategy that involves buying 'insurance' in the form of puts or calls (or other hedging strategies that are more complicated) which protects the investment against suffering a (large) loss.

Currency costs usually refer to the gain or loss made when changing the funds back into dollars. When a foreign investment is made there is a certain exchange rate between that currency and the dollar. When exiting that investment, the exchange rate probably has changed. So, there's a cost (or benefit) associated with the change in the exchange rate.

Mutual funds, for example, can incur these costs. The managers want you to know (or must disclose) how much the hedging and exchange rates affected the investment.