It’s all about the Benjamins. And the euros. And the yen. And the krona.

If I had to pick one thing that will influence investor returns over the next few years, it would be the dollar and global currency fluctuations. Whether the Federal Reserve can engineer a soft landing for the greenback—or whether we’ll be seized by runaway inflation—holds the key to our economic prosperity, and a good portion of our portfolio profits.

Perhaps that’s why we’ve devoted this issue of the Journal of Indexes to currencies, which I think of as the great overlooked driver of portfolio returns. Currencies represent the largest and most liquid financial market in the world, and yet, few investors are aware of the importance they play in portfolio returns, and fewer still make any attempt to manage currency exposure in their portfolios. We hope to change that.

Leading off the issue is an opus magnum from the brain trust of our in-house analytics group—Dave Nadig, Matt Hougan and the recently hired Lara Crigger. Together, these three make sense of the basics of currency markets and how investors can utilize currency-based exchange-traded funds to build better portfolios. It’s hard to imagine an investor who won’t be well-served by reading this article.

Next up, Steve Meizinger of the International Securities Exchange sheds light on the realm of FX options, including how they can be used to control risk in a portfolio. Marc Chandler and Jeffrey McCarthy of Brown Brothers Harriman then follow with a great article laying out the basics of what drives currency returns. Specifically, they discuss how investors should think about the near-term prospects for the dollar.

Anchoring our currency segment, two experts from Invesco PowerShares—CEO Bruce Bond and Joe Becker—show how novel index strategies have opened up institutional-caliber currency strategies to retail investors for the first time.

We then broaden our focus with an article on the future of fund ratings by regular JoI contributor Gary Gastineau. Gary’s got a whole new way of evaluating the mutual fund and ETF universe, based on the way investors are actually using funds these days.

Next up, David Blanchett exposes closet indexers and highlights the true cost of active management. Finally, the inimitable David Blitzer comes in with a great piece on another red-hot topic: whether the events of 2008 killed the efficient markets hypothesis.

If all that weren’t enough, we add in an index wonk’s delight this issue: a crossword puzzle designed to challenge even the most knowledgeable industry diehards out there.

We hope you enjoy the issue and wish you the best of success in navigating the markets.

Jim Wiandt
Editor