Just as hand sanitiser can minimise the spread of Corona, then SaepioX ensures that you are not hit by incorrect calculations in your FX exposure when markets are hit by pandemics, oil price fluctuations or other sudden market adjustments.
With market volatility high (VIX) – see below – then even small excel errors cause wrong decisions - a situation that can be made worse by your hedge.
Some of the most recurring errors we see 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 the exposure is not always 1 to 1.
Fund look through (x-ray)
Having up-to date 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 agree.
Not buying x-ray on all funds as it is too expensive (e.g. US Loan funds does not only lend US companies USD!)
Many face huge costs 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. SaepioX's 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 is also a 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 the settlement date – this is a very common issue as back-office processes are not optimised after FX Hedging purposes. Often the opinion is that dividends are only once every year (up to quarterly) but having thousands of positions means that dividends are spread out on multiple days. In SaepioX, it is possible to compensate for the dividends during 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 synchronised then the FX risk exposure will jump.
– contact SaepioX here and we will review your excel sheet to give you a second opinion - for free.