Foreign exchange services

As our client you can benefit from an automated FX calculation platform provided by Monex.

Mitigate the risk of currency fluctuations for your investors with this automatic solution. This service is available to clients who are registered with Paxus.

Key benefits

• Automated FX share-class hedging solution for investment managers using Paxus
• Mitigate the FX risk between the base currency of the fund and the share-classes across non-base currency
• Ability to hedge in G10 and emerging market currencies
• Tailored collateral or margin terms across the hedging line
• Ability to onboard and have hedging lines in place within five to seven days, subject to risk and documentation provided
• Hedge under or outside an International Swaps and Derivatives Association agreement (subject to circumstances)
• Secure storage of confidential information in an SFTP file that is automatically uploaded via Paxus
• Delegate reporting obligations, including European Market Infrastructure Regulation reporting

How it works 

• Monex Auto-FX platform calculates the suggested share class hedge based on the data inputs from Paxus 
• Share class hedging information is sent from Paxus via the fund administrator to Monex 
• The calculation will be shown to the investment manager and subsequently the trade will be executed 
• Users have the ability to manually increase or decrease the suggested trade notional, with amendments captured via audit trails 
• Post-trade reporting to the investment manager, fund administrator, and Paxus 
• Monex will produce daily, weekly, and monthly mark to market calculations 

How can you benefit? 

For more information email:  autofxsolution@monexeurope.com 

Disclaimer 

Monex Europe Markets Ltd is a company registered in England and Wales, No. 08357567. Monex Europe Markets Limited is authorised and regulated by the Financial Conduct Authority to conduct investment business, Firm Reference Number 596146. Monex Europe Markets conducts all trades on a restricted advisory basis. Derivative products are not suitable for everyone and may present a high level of risk to your capital. You should seek independent advice if necessary. 

Monex Europe Markets Ltd pays a fixed fee to Apex for providing information to potential clients about Monex under a fee agreement. 

Registered Office: 3rd Floor, 1 Bartholomew Lane, London EC2N2AX. 

FX markets have been extremely volatile in recent years, driven by factors such as geo-political events, macroeconomics, trade balances, and interest rate differentials. G10 currencies including GBP, USD, and EUR have historically traded percentage moves within intra-day timeframes and more than 10% moves within a week or two (E.g. Between March 9-17, 2020; GBPUSD moved 12.69% as an indication). 

Given the substantial risks involved, private equity firms expose themselves to unnecessary FX risk by leaving commitments such as capital calls or signing/closing periods unhedged.We have partnered with a leading FX provider to support the private equity sector and use FX products to remove associated risks. Our solution supports clients with uncollateralised capital call facilities or at least reduced margin deposit facilities. 

Key benefits 

• Competitive rates compared to other providers 
• Access to dedicated FX dealer from strategy to execution 
• Uncollateralised capital call facilities or reduced margin deposit facilities 
• Improved investor relations by not having to issue additional capital calls 
• Hedging currency risk, removing the need for cash buffer 

How does the process work? 

• The FX provider supports the private equity (“PE”) manager with a short dated hedging line to fix the capital call 
• This allows the vehicle to ‘call down’ the exact amount of capital from the investor pool (as the exchange rate has been fixed) 
• This solution removes the requirement for the PE manager to ‘over-call’ capital to allow for FX fluctuations within the requisite call period 
• The FX provider can offer flexibility around the settlement date of the FX hedge to allow for unexpected delays in the monies arriving 
• The PE manager can utilise the hedge early if the monies arrive earlier than anticipated 
• This simple strategy removes the risk of adverse movements within the call period 
• The FX provider will look to offer this hedge without requiring any upfront cash or collateral against the short-dated FX hedge 

Risk: By fixing your FX rates using forward contracts, you will be prevented from benefiting from any potential favourable rate movements in the spot market during the call period.