Efficient currency hedging
FX risks make a significant contribution to the risk of your institutional portfolio. They represent additional risks and are not compensated by a risk premium.
Therefore, it is reasonable to have a central partner for all currency-related topics at your side. At 7orca, we see ourselves not only as a manager and sparring partner, but also as a proactive companion for all currency-specific issues. In addition to the operational management of the currency overlay, this includes a large number of associated topics and issues for which 7orca acts as an independent and proactive advisor.
We are the partner of institutional investors when it comes to FX risks. According to their individual specifications, we hedge these in customised active and passive currency overlay solutions.
Your dedicated currency manager
Extensive value creation
Mandating a currency overlay expert has many advantages for investors. A central contact person oversees and manages all their currency issues.
The FX overlay expert creates a transparent and flexible structure that enables a quick adjustment of all currency positions to investor needs or regulatory changes. A central liquidity management minimises cash holdings. The efficient design makes it possible to use netting effects and thus reduce trading costs.
Passive Currency Overlay
Passive FX hedging constantly protects your portfolio according to a defined hedging level, with cost-effective optimisation enabled by 7orca's tenor management.
Deduction of the FX exposure to be hedged
The exact identification of your FX exposure is a daily recurring process. We start with the inventory by taking the currency exposures of the daily holdings.
The characteristics of liquid and illiquid asset classes play an important part. We exclude assets and portfolios whose currency risks are not to be hedged.
Deviation bands an netting effects
Specified deviation bands are used to contrast transaction costs with the expected risk contribution. This allows us to limit transaction costs to an economically reasonable level.
Netting effects are captured by consolidating the FX exposure of all currency pairs across the segments, funds and FX regions trading the netted FX exposure.
Synchronisation of currency hedging and procurement
To further reduce market price risks and transaction costs, 7orca synchronises spot transactions in the underlying investment portfolios with the hedge adjustment in the overlay portfolio.
This allows us to eliminate FX risk immediately and cost-effectively at the time of its occurrence.
Choice of instruments
With regard to the choice of hedging instruments, 7orca is not subject to any restrictions and uses the instruments that are most efficient under the given framework conditions.
These include both forwards and exchange-traded futures. In each case, we use only highly liquid and linear instruments.
Die Ausführungsqualität leistet einen wesentlichen Beitrag zur Gesamt-Performance eines Currency Overlay-Mandats. Daher legen wir einen besonderen Fokus auf den Execution-Prozess.
7orca uses BestX software for pre and post trade analysis. Regardless of brokers and execution venues, it can thus be ensured that a transparent analysis of the transaction costs is carried out before trading and that trading is executed at the most attractive conditions.
We confidently roll out currency overlay solutions within a structured implementation project to ensure a smooth mandate set-up.
In close collaboration with the client, we define milestones and set the schedule. The steering committee and the project group regularly exchange information about the implementation progress.
Monitoring and managing counterparty risk is an essential part of our currency overlay programme.
When concluding forwards, the customer enters into a counterparty risk against the FX brokers. Default risks arise from the sometimes considerable fluctuations in the market value of the FX forwards.
7orca monitors counterparty risks continuously and repeats the detailed broker due diligence on an annual basis.
7orca centralises liquidity in the overlay segment instead of a decentralised holding of liquidity for FX hedging by individual underlying investment managers in the respective underlying segments.
We have established efficient processes so that the average liquidity holding in the overlay segment can be kept as low as possible.
Based on the characteristics of your investment vehicles, the allocated asset classes and the desired hedging, 7orca develops your optimal mandate structure.
In doing so, we choose what is the most efficient and cost-effective structure for you. At the same time, we avoid over-complexity in the design of the overlay segment.
The foreign currency exposure to be hedged is aggregated across all asset classes and sub-segments.
FX report and data feed
We adapt the scope, content and level of detail of the performance report to your individual needs. 7orca offers to visualise the individual segments' performance attribution as well as the performance attribution relative to the defined benchmark.
If required, 7orca can also prepare a cash flow forecast. In principle, we can provide this information in all common data formats.
Individual key figures can be automatically transferred to your management system via an interface.
FX Overlay Management
7orca is your partner in FX matters
We are your sparring partner for your currency risks. With more than 20 years of experience in FX management, 7orca places its professional expertise at the centre of its activities for its clients.
A state-of-the-art IT landscape, proprietary investment processes and integrated software ensure an efficient risk management solution that is consistent with its characteristics.
As an independent asset manager, we select the most suitable implementation for you, without any conflicts of interest.
Please feel free to find out more in a personal conversation with us.