In todayâs barren market, this decline has mobilised credit-hungry hedging providers to demand more frequent margin payments to cover losses creating, an almost intolerable set of circumstances for many FoHFs. The HIPâs new Forex module mitigates the problem by enabling FoHF portfolio managers to view their FX exposure, in real time, for the first time, using live currency feeds from Thomson Reuters. FoHFs can drill down to identify exposures relating to particular hedge funds or investor share classes, then plan and implement hedging strategies based on a firm understanding of risk. The new HIP module is the latest development that youDevise has introduced to help the FoHF industry solve problems created by the recent financial crisis, restore investor confidence, rebuild assets under management, and mitigate against future crises. Background
âWhile managers can protect themselves from a worst-case, investor-driven liquidity crisis through lock-up and notice periods, to date FoHFs have lacked sufficient information to protect themselves from losses resulting from volatility in FX rates,â said Richard Koppel, Managing Director, youDevise. An expert in FoHF technology, Mr. Koppel co-developed the HIP, the first online portfolio management system used by FoHFs and their administrators, such as Northern Trust, to track daily position information.
âMany FoHF managers have taken a laissez-faire approach to managing FX, hedging themselves incompletely and updating their positions infrequently â sometimes only once a month,â said Mr. Koppel. âRecent losses, however, have exposed the âhidden painâ of doing little as the value of dollar share classes increases and euro and pound based investments decline. FoHFs now see an urgent need to monitor and manage these hedges actively, which is what our module does.â FoHFs not using the HIP typically employ at least one or two full time employees to create and maintain linked spreadsheets to produce basic portfolio reports. These âspreadsheet jockeysâ generally require several days to create anything like the reports generated by the new HIP module. HIP Forex Exposure Module Summary
ï· Analytics are based upon daily forward rates imported automatically via the Thomson Reuters feed. Users can select a portfolio, a hedging requirement ranging up to 100% and the number of days to view exposure.
ï· Currency exposure calculations factor in both investments and cash held in each currency. ï· Users can view FX exposure related to investor subscriptions and redemptions, whilst separately monitoring FX exposure related to investments in underlying hedge funds. ï· The HIP calculates the FoHFâs exposure to each currency and highlights exposures that are insufficiently hedged.
ï· Forward contracts and their effect upon hedging are dynamically recalculated over time based on imported forward rates, ensuring access to the most up-to-date information to hedge appropriately.
ï· The new module is free to all current HIP users.