Glossary

Local-Currency Return

Also known as: Local currency total return

The total return generated by an investment measured entirely in the currency of the country where the underlying asset is located, before any adjustment for exchange rate movement against the investor's reporting currency.

Local-currency return isolates pure asset performance — income return plus capital appreciation — from the effects of currency, which is precisely why global benchmark providers such as MSCI publish local-currency return series for their international property indices alongside home-currency figures: it allows comparison of, say, income growth and cap rate movement in the UK market against Japan or the U.S. on a like-for-like basis, uncontaminated by how the pound, yen, or dollar happened to move against a given investor's home currency during the period. For a fund manager, local-currency return is the appropriate metric for evaluating the quality of country- and asset-level investment decisions, while the investor's actual realized return (after conversion back to their home currency, and after any hedging costs or gains) is what ultimately matters for their own portfolio-level performance measurement — the gap between the two figures is the currency effect, and a widening or narrowing of that gap over a holding period is itself informative about how much of an unhedged position's volatility is coming from currency versus real estate fundamentals.