7orca Passive FX Overlay – rules-based and cost-efficient.
Defined hedge ratio, implemented with discipline.
Reduce risk, systematise the process.
Foreign currency positions have a direct impact on performance, risk budgets and the balance sheet – often without a clearly defined hedging framework in place. Fluctuating exchange rates can therefore create planning uncertainty and additional effort in risk reporting.
7orca Passive FX Overlay implements a previously defined hedge ratio with discipline and on a rules-based basis. The focus is not on the tactical assessment of individual currencies, but on the efficient, transparent and operationally robust implementation of a predefined hedging logic – with the objective of planning certainty, cost efficiency and operational clarity.
Asset Management and currency management remain deliberately separate: the investment decision remains with the Asset Manager, while foreign currency risks are managed through a specialised overlay structure.
The basis of every hedge.
The effectiveness of passive currency hedging depends materially on the quality of the underlying exposure determination.
7orca analyses and aggregates FX exposures across fund structures, asset classes and investment managers. On this basis, the relevant net currency risk, the required hedge positions and the mandate-compliant implementation of the hedge ratio are derived.
This turns individual currency positions into a robust foundation for an institutional Passive FX Overlay.
7orca FX Overlay in detail – FX Exposure Management – learn more
Passive FX Overlay based on mandate logic.
Passive FX Overlay does not follow a rigid implementation logic. Depending on portfolio structure, asset class, data availability and governance requirements, different hedging approaches may be appropriate.
The decisive factor is the choice of a structure that fits the investor’s objective and manages currency risks in a cost-efficient, transparent and operationally robust manner. This creates a hedging solution aligned with the specific requirements of the respective mandate.
Structure. Differentiate. Implement.
- Share class hedging
- Index tracking
- Cash flow matching
- Portfolio hedging
- Look-through hedging
- Enhanced passive
Structured overlay architecture.
Passive FX Overlay is more than the implementation of individual hedging transactions. Management takes place within a structured overlay architecture that connects all relevant implementation components within a consistent framework.
By consolidating FX risks, processes are standardised, netting effects are utilised and operational interfaces are reduced. Not every change in exposure is traded in isolation; instead, the consolidated net exposure is implemented on the basis of defined requirements.
Consolidate. Manage. Take responsibility.
- FX Exposure Management
- Maturity management
- Deviation bands
- Netting
- Best execution
- Liquidity management
- Reporting and performance attribution
Reporting and steering capability.
Institutional Passive FX Overlay requires a transparent presentation of exposure, hedging transactions, costs, performance and risk impact.
Transparent reporting provides the basis for assessing hedge ratios, adjustments and implementation results over time. At the same time, it supports governance processes, internal control requirements and the clear separation of Asset Management and currency management.
This makes the implementation of defined hedging requirements manageable, documentable and reviewable.
Extending hedging, designing profiles.
Enhanced Passive FX Overlay.
Passive FX Overlay can be supplemented with rules-based, options-based elements.
Enhanced Passive combines traditional hedging with structured option strategies and thereby expands the design options within defined risk parameters. The objective is to structure risk, cost and hedging profiles within clearly defined ranges.
The approach remains rules-based and does not follow active FX positioning.
Analysing private assets, identifying FX risks.
Currency risks do not arise in liquid assets alone. Particularly in Private Markets investments – private equity, private debt, infrastructure and real estate – the fund currency does not necessarily correspond to the actual economic FX risk.
Using the FX look-through, 7orca identifies the relevant currency risk at the level of the underlying investments and consolidates it across fund and mandate structures – as the basis of any overlay hedge.
Institutional use of passive currency hedging.
7orca Passive FX Overlay supports institutional investors in efficiently implementing defined hedge ratios, assessing existing FX hedging structures and making currency risks manageable through a specialised overlay structure.
Rules-based. Efficient. Transparent.
- Analysis of existing currency risks and hedging structures
- Assessment of suitable Passive FX Overlay approaches
- Implementation of static or predefined hedge ratios
- Use of netting, best execution and reporting structures
- Insight into transparency and governance components
