Currency Overlay and Share Class Hedging Services


Currency Overlay and Share Class Hedging services

Deloitte Hedging Analytics and Consulting services

Deloitte’s FX Overlay team provides FX hedging reports and consulting services for portfolio hedging, share class hedging and benchmark hedging. We provide hedging analysis as well as strategy, regulatory, operational and implementation assistance to our clients.

Your challenges

As the number of queries from investors and Asset Managers related to Share Class Hedging and FX Overlay structures is increasing, it is crucial to clearly identify the different factors impacting the performance of hedged share classes and portfolios.

We recently explored these challenges of the FX hedging market with three industry participants in a roundtable published in our Performance magazine.

Furthermore in the coming months, new ESMA guidelines on UCITS share classes could come into force making sure Management Companies have the share class hedging process under control. With Deloitte Hedging Analytics, Management Companies can fully rely on Deloitte to make sure that the oversight of the hedging and its thresholds are monitored and reported independently.

Deloitte Hedging Analytics

DHA is our reporting system which analyses FX hedging for portfolio and share class hedging of different types:

  • Standard,
  • Multi-currencies,
  • Benchmark,
  • Others.

DHA Reports provided to our clients break down the hedging performance as a performance attribution between up to seven sources of FX hedging impacts based on the parameters of the hedging structure and process.

These controls can be upon request or on a periodic basis as an automated reporting with data management. Recommendations to improve the process would be issued.

Several KPI/KRI’s can be reported in order to ensure that the FX hedging process is under control.
DHA reports break down impacts of unavoidable and avoidable sources, providing value added information to the client on the quality of the hedging performed.

Our report can present simulations of hedging performance with other parameters of the hedging. For example, it can show the expected performance with a 99% - 101% hedging ratio threshold instead of a current threshold at 98% - 102%.
Our reports are generated in a visualization software with dynamic KPI dashboards that can highlight up to thousands of share classes in one view.

Deloitte Hedging Analytics - Multiclass Performance & Dashboard

See on the left a demo of our dynamic tool and the one view dashboard

Deloitte Hedging Analytics – Hedging Analysis

See on the left a demo of the performance attribution of hedging impacts

Our services

An external and independent view might shed a new light on the best practices of the market related to the hedging processes. Moreover, our services go well beyond the analysis and recommendation phase and extend to the implementation phase and post-implementation risk monitoring.

We provide a broad range of services to respond to your hedging challenges:

  • Assistance in the RFP for the selection of hedging services provider
  • Review of the hedging structures, processes and Target Operating Model
  • Benchmarking of the hedging process and policies with gap analysis and peer study
  • Independent certification of the performance of a hedging strategy
  • Re-definition of the hedging process based on identified recommendations
  • Review of the pricing and revenue strategy regarding FX products – Focus on FX transparency, market practices and regulatory requirements (e.g. MiFID II)
  • PMO Assistance in the implementation of new FX processes or pricing policy
  • Broad regulatory assistance on FX and share class hedging matters

For the following structures:

  • Share Class Hedging with NAV Hedging
  • Look-Through Hedging
  • Double Deckers / Triple Deckers
  • Active/Passive FX Overlay
  • Duration Hedging at portfolio/share class level
  • Delta Hedging at portfolio/share class level
  • Benchmark Hedging as currency neutralisation or as pure replication of the benchmark hedging methodology
  • Other hybrid structures

Get in touch

Xavier Zaegel, FRM

Xavier Zaegel, FRM

Partner | Investment Management Leader

Xavier is a partner within the advisory and consulting department and is the head of the Capital Markets practice in Luxembourg. As a market and credit risk specialist, he has been leading various ass... More

Sylvain Crépin, FRM

Sylvain Crépin, FRM

Partner | IM Advisory & Consulting Leader

Sylvain joined Deloitte Luxembourg in January 2012 and currently serves as Partner leading our Advisory, Consulting & Operate offering for the Investment Management industry and our Risk & Regulatory ... More