Forwards/Futures, Exchange Rate Risk currency, successful, contract, only, lock

Carson

Reviewing the obscure stuff, from my notes.. for the exchange rate risk of a foreign market portfolio.

There are 2 strategies to "lock in" the future portfolio value, with exchange rate futures:

(1) you hedge the equity market risk only... where (if successful) you should earn the foreign Rf rate on the notional amt hedged
(2) you hedge the equity mkt AND the currency risk... where the notional amt of the X/R contract is the amount earned if invested in foreign Rf rate. If successful, return should be domestic Rf rate.

Can someone explain why (1) and (2) are so? It's not going in, for some reason.