When the markets are volatile is when your hedge protects your assets!

Just as hand sanitizer can minimize the corona to spread – then SaepioX ensures that you are not hit by wrong calculations in your FX exposure when markets are hit by corona, oil prices or other market adjustments.

With market volatility high (VIX) – see below – then even small excel error causes wrong decisions - this maybe even that your hedge worsens the situation.

Figure 1 - MSCI - https://www.msci.com/www/blog-posts/the-coronavirus-market-impact/01732620365

Some of the most recurring errors we have seen are

  • Depository Receipts (e.g. ADR), Warrants and dual-listed companies

Very often they get hedged against their listed currency (which for ADRs is USD), while the underlying risk is anything but. And not always are the exposure 1 to 1.
  • Fund look through (x-ray)

Having updated data as possible is often a problem. Very often data is at least 1 month old. SaepioX has an agreement with MorningStar, which enables you to get an x-ray on currency weight as fast as a 1-day delay if you and the fund manager agrees.

Not buying x-ray on all funds as it is expensive (e.g. US Loan funds does not only lend US companies USD!) – Many faces huge cost to get full x-ray data as you need to pay also for the constituents. And getting all constituents follows the data maintenance problem in your core system. SaepioXs agreement with MorningStar enables you to get only the x-ray data for the FX Hedging process without having to pay for the constituents as well.

ADR problem as well if just using vendor data – Fund Managers tend to send x-ray data with the purpose of portfolio management but do not cover the need for FX Hedging, therefore often ADRs and similar instruments are not showing in the correct FX risk dimension.

  • Corporate Actions

Dividend payments are adjusted in the Fund price/NAV but not booked before settlement date – this is a very common issue as back-office processes are not optimized after FX Hedging purposes. Often the opinion is that dividends are only once every year (up to quarterly) but having 1’000s of positions meaning that dividends are spread out on multiple days. In SaepioX it is possible to compensate for the dividends for the settlement cycle.

Splits/mergers often result in a mismatch between the booking of price information and registration of the Corporate Action – if the information is synchronized then FX risk exposure will jump. SaepioX offers.

SaepioX is easy to onboard and even more easy to use.

Get your calculations tested

– contact SaepioX here and we will review your excel sheet to give you an second opinion - for free.

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