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Currency Hedging

How can asset managers and asset owners optimize their investments in non–base currency securities using currency hedging techniques?

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Overview

SGSS currency hedging consists of various solutions:

For asset managers, asset owners, corporates and banks, investing in non-base currency, securities can be managed with spot currency transactions either manually, or systematically with standing instructions, or with a combination of both. These transactions are purely technical and leave the portfolio or fund with a currency exposure of the value of the assets and the remaining cash in these non base currencies.
When SGSS acts as custodian, it is possible to set up standing instructions for principal and income.

Asset owners or asset managers might also want to hedge each of the non base currency assets in their portfolio or their fund, against foreign exchange variation using the Passive Currency Hedging (PCH) technique, using forward forex contracts.

More specifically asset managers may want to offer the performance of their fund in a currency different from its fund currency. The Share Class Hedging (SCH) technique is designed for this purpose, using forward forex contracts and adjustments at subscription and redemption, at a defined currency change and at a defined time period.

With Multiple Currency Hedging (MCH), a combination of the two previous techniques, asset managers can simultaneously hedge each currency bucket of a fund, against foreign exchange change and offer in currency different from the fund base currency. This combined solution presents the advantage of offering a fund in the base currency of the investor without any remaining underlying currency exposure. This reduces Solvency II capital requirements to a minimum showing, providing a readable performance for S2 regulated investors.

SGSS’ three currency hedging solutions are offered on a contractual basis.

Key features & benefits

Includes hedging calculation and execution, set to the client’s guidelines such as hedging ratio, roll frequency and netting option

Ensures, following credit line approval, that SG is the counterparty for all foreign exchange transactions and adheres to transparency in calculation and pricing

Ensures that Forex OTC transactions are governed by Master Agreements with CSA

Provides all necessary reporting materials

Is available whether SGSS is the securities service provider or not

How does it work ?

Countries

FranceGermanyIrelandItalyLuxembourgUnited KingdomSwitzerlandUnited Arab EmiratesBelgiumDenmarkFinlandNorwayPortugalSwedenKazakhstanSaudi ArabiaAustriaPolandSpainSloveniaSerbiaThe NetherlandsRussiaRomaniaCzech RepublicBulgaria

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Head of Strategic Marketing Societe Generale Securities Services
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