There Is A Hidden Currency Risk Inside KXI That Most Investors Never See Coming

"KXI is a global fund. Holdings like Nestlé, Unilever, and British American Tobacco operate in dozens of currencies, and the U.S.-listed holdings are not immune either. Philip Morris International, Coca-Cola, PepsiCo, and Colgate-Palmolive all flagged foreign exchange as a material headwind in their most recent earnings. Coca-Cola absorbed a 5-point currency headwind to comparable EPS in 2025, even as the underlying business grew."

"When the U.S. dollar strengthens, the revenues these companies earn abroad translate back into fewer dollars, compressing reported earnings even when local business is healthy. For KXI holders, this is a hidden performance drag that doesn't show up in any single holding's organic growth number."

KXI has emerged as a strong performer in 2026, gaining nearly 14% year-to-date with a 9% surge in the past month as investors sought defensive positions during market volatility. The fund attracts investors through its low 0.39% expense ratio and 2.27% dividend yield, making it appealing during uncertain growth periods. However, currency risk represents a major overlooked threat. Major holdings like Nestlé, Unilever, Coca-Cola, and Philip Morris International operate globally and face significant foreign exchange headwinds. A strong U.S. dollar compresses reported earnings from international operations, even when underlying businesses perform well. The Fed's interest rate trajectory will be critical in determining future dollar strength and KXI's sustainability.

Read at 24/7 Wall St.