“ESMA sees currency risk hedging as a way to support a single market, as well as a means to level the playing field for investors from across the EU”
Investors investing in a fund with a base currency different from their own local currency are subject to the risk of currency fluctuations between their local currency and the fund’s base currency.
For example, without currency hedging, European investors investing in US fund would record a profit or loss due to the fluctuation in EUR-USD exchange rate.
If the fund generates a positive performance in its base currency, the currency translation into local currency of the investor may nevertheless lead to negative results (if the base currency has lost against the local currency during the investment period).
- As an investor, exchange rates can have significant impact on their returns for better or worse
- As an investment company, providing your clients with this service can help them capture a broaden range of investors
Share Class Hedging
Share class hedging seeks to minimise the currency exposure between the hedging currency and the share class currency. It aims to give investors with returns correlated to the base currency performance of the fund. However, any underlying currency exposure in the portfolio will remain unhedged.
This method hedges movements for currencies the fund is invested in against the base currency of the fund. It aims to reduce the currency differences in the portfolio. However, hedging between the share class currency and the fund base currency will not be performed.
Multi Currency Hedging
Multi Currency Hedging combines share class hedging and currency overlay to protect your investors from any FX fluctuations (either on the asset or liability side of the fund).
HedgingFX offers affordable computations for those 3 distincts services (Share Class Hedging, Currency Overlay and Multi Currency Hedging) via a fully automatized platform using the best practice in the industry to meet our client’s highest standards.
We lean on our extensive experience in this product to provide our customer with a fully customizable product.
Several mesures are set up to ensure smooth transaction of this service
those measures include :
- 4 eyes check to ensure proper client settings
- date control on received files (both from FA and TA)
- number of files received per client and their completeness
- ISIN controls (existence, ownership…)
- automatic alerts
- before sending orders to the client’s execution table, we provide relevant teams with all trades to perform along with a 30 minutes window (to be determined with the client) enabling them to abort the process if need be
Moreover a leading insurance company will cover any potential miscalculation from our tool up to 4 millions euros.
We also propose our clients with a 3 month free trial parallel run so they can witness first hand our tool’s ability to manage those risks without any drawbacks.
to learn more about it, please contact us at firstname.lastname@example.org