Private Markets Investments – 7orca FX Exposure Management.
Understanding Private Assets, identifying economic currency risks.
Reviewing the fund currency,
refining the FX exposure.
Private Markets investments – private equity, private debt, infrastructure and real estate – are an established part of institutional portfolios; with their growing internationalisation, their currency dimension grows as well.
Private Assets place specific demands on the currency management of institutional investors. The fund currency alone does not necessarily reflect the actual economic FX exposure. Valuation cycles and delayed reporting data can limit transparency over existing currency risks. At the same time, capital calls, distributions and existing natural hedges influence the level and development of the FX exposure to be hedged.
7orca supports institutional investors in systematically capturing these influencing factors, transparently representing the economic FX exposure and integrating Private Assets into a consistent hedging logic.
Illiquid assets,
complex steering foundations.
In Private Assets, FX-related questions arise throughout the entire investment life cycle. Determining the economically relevant FX exposure therefore requires a differentiated assessment of the data basis, valuation logic, cash flows, liquidity requirements and existing manager and fund structures.
Typical starting questions
Data basis
- Which data sources are available for exposure determination, and how complete, up to date and consistent is this information?
Valuation cycles
- Which valuations, valuation dates and reporting frequencies provide a sufficiently robust basis for the exposure?
Cashflows and liquidity
- How do capital calls, distributions, collateral and margin requirements affect liquidity needs and hedging logic?
Manager and fund structures
- Which explicit or implicit hedges already exist at manager or fund level, and how should they be taken into account when determining the economic FX exposure?
From investment
to hedging basis.
7orca brings together relevant information from fund, manager, investment and mandate structures and derives a consolidated economic FX exposure. On this basis, a mandate-specific hedging logic can be developed and – depending on the objective – embedded into overlay, reporting and governance structures.
Analysis and derivation logic
Analysing investments
- Determine relevant FX exposures at the level of the underlying investments.
Aggregating FX exposure
- Consolidate economically relevant currency positions across fund, manager and mandate structures.
Deriving hedging logic
- Assess valuation cycles, cash flows, natural hedges, collateral and liquidity requirements.
Connecting implementation
- Integration into Passive, Active or Holistic FX Overlay solutions for systematic currency steering.
Looking through asset classes,
consolidating FX exposure.
7orca FX Exposure Management makes economic currency risks visible: building on the onboarding of asset managers, the proprietary FX look-through identifies relevant currency positions at the level of the underlying investments and consolidates them across fund, manager and mandate structures.
Ongoing analysis keeps this hedging basis up to date – providing institutional investors with a robust foundation for holistic currency management.
Embedding hedging logic into the mandate framework. Passive. Active. Holistic.
The derived hedging logic can be integrated into different FX Overlay approaches, depending on the mandate objective and steering requirements. This requires a robust assessment of the hedging basis as well as the requirements relating to data, liquidity and implementation.
Currency management for private assets,
an underestimated source of value.
Private Assets require a differentiated view of currency risks. The publication assesses the key specific characteristics and examines the implications for institutional currency management.
At the centre is the question of how the specific characteristics of Private Assets can be translated into a consistent steering approach.
Checking the exposure, deriving the hedging logic.
A robust determination of the economic FX exposure forms an essential basis for the design of currency hedging, particularly for illiquid assets.
An initial discussion enables a structured assessment of the existing starting point and potential hedging logic in the respective mandate context.
The FX specialists at 7orca are available to institutional investors for a confidential analysis of their Private Asset structures.
Look-through. Aggregate. Hedge.
