HSBC has created a new tool called foreign exchange (FX) HEAT to analyse the effectiveness of currency hedging strategies for asset managers and institutional investors.
Asset managers and institutional investors will be able to access independent reports on an automated basis to enhance the governance and oversight of their foreign exchange hedging.
FX HEAT will enable investors to assess on an ongoing basis the quality of the bank’s FX hedging and its impact on their returns.
It will also provide clients with an overview of the performance divergence contributors between currency hedged and non-currency hedged investment returns.
According to HSBC, these include a series of market-driven and operational factors. With this type of analysis, FX clients are able to make decisions on optimising the FX hedging efficiency of their investments.
Vincent Bonamy, HSBC’s head of global intermediary services, markets and securities services, says: “Investors want more clarity than ever before during uncertain times. They want to understand the costs and the risks associated with currency hedging for their fund portfolios.”
Bonamy explains: “FX HEAT can help clients strengthen their own internal governance with independent oversight of their FX strategies’ performance.”
Sebastien Danloy, HSBC’s global head of asset owners and managers, markets and securities services, adds: “HSBC is one of the world’s largest custodians, providing asset owners and managers with access to our market-leading global FX business to manage the currency risk in their portfolios. FX HEAT will help our clients improve the efficiency of their operations with independent hedging efficiency analytics.”
FX HEAT was created in collaboration with HSBC’s FX services team and an independent quantitative specialist. It is set to be integrated by year-end into HSBC Evolve, HSBC’s single-dealer FX execution platform.
