Foreign Exchange Risk

Alternative Credit Capacity 

for Fund-Level Hedging Programs

HedgeNAV provides credit capacity to equity funds when their currency exposure is highest but their access to stand-by liquidity is lowest, often in concert with a wider Fund Finance transaction such as a NAV Facility

HedgeNAV serves 

a small, but growing, niche

Implementing credit solutions for the long-term FX hedging needs of investors with concentrated and mature portfolios of private equity or real estate assets, with a focus on those with NAV-based credit facilities in place or pending

HedgeNAV blends 

innovation and collaboration

Partnering with these investors and their NAV-based lenders to design and implement FX hedging programs that are fully funded by a new tranche of the NAV Facility, with no need for security sharing  with the investors' hedging banks

HedgeNAV benefits

multiple stakeholders

Enabling robust currency risk management during the period surrounding a fund's peak NAV, when its financial performance is most sensitive to FX risk, by a means that also improves the risk-return profile for its lenders

HedgeNAV contributes its expertise and capital, investing alongside NAV Facility providers and any co-investors as a minority lender and administrator during the term

FX Hedge NAV Facilities are:

An optional tranche of an existing long-term portfolio financing

Supporting an investment portfolio's currency hedging needs

When it matters most

Maximizing investable capital, minimizing liquidity and regulatory risk

In a way that also benefits the lenders of the main NAV Facility

Why HedgeNAV is against "Minimum Liquidity"

Minimum Liquidity requirements do not feature in Hedge NAV Facilities.  These provisions are prevalent in banks' ISDA documentation for fund-level credit lines because they enable the bank to terminate all of its hedging transactions if the fund's callable capital (plus any cash or equivalents on balance sheet) drops below their specified level.  For any hedges with this bank that are liabilities at the time, an unwelcome cash event befalls the fund.  As all ISDA terms can differ between a fund's bank group, so can the presence, level and specific terms of any required Minimum Liquidity.  

Minimum Liquidity requirements do serve a genuine purpose; some funds would be unable to get any hedging credit capacity from banks without them.  But their main effect is to deny funds with active hedging programs the ability to fully deploy their capital commitments on investments without also accepting substantial liquidity risk.