Data & Intelligence
Currency Risk Management Survey
Posted On: 16 May 2016
EMPEA’s Currency Risk Management Survey is the first pan-emerging markets exploration of the impact of currency volatility on the private equity industry. The survey features the views of 146 industry practitioners, and aims to provide the industry with a better understanding of how both GPs and LPs* report and manage exchange rate movements in their EM PE portfolios—including decisions regarding whether, when and how to hedge.
Key findings from the Currency Risk Management Survey include:
- Approximately 75% of respondents rank currency risk as an important or very important factor for their firm. While 72% of LPs believe that ongoing currency volatility will lead to a delay in exits, only 31% of GPs do.
- Nearly 60% of respondents say exchange rate movements have subtracted value from their realized EM PE investments, with several respondents estimating losses of US$500 million or more since 1 January 2014.
- Only one-third of respondents believe EM currency depreciations/ devaluations create a worrisome misalignment of interest between GPs and LPs with respect to fund economics.
- A majority of respondents—63% of LPs and 57% of GPs—do not construct their portfolios with currency risk as an explicit objective.
- Approximately 65% of LPs do not hedge FX risk with their EM PE commitments, while roughly 11% run a currency overlay, which hedges the institution’s exposures across their entire portfolio of assets and fund managers.
- Approximately one-third of LP respondents want their EM PE GPs to hedge FX risk. When asked which types of EM PE funds they believe should hedge FX risk, LPs most frequently selected country-dedicated funds.
- And more!
We are grateful for the support of our Sponsors The Abraaj Group and AMEXCAP.
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Rashad Kaldany | Executive Vice-President and Growth Markets, CDPQ
David Rubenstein | Co-Founder and Managing Director, The Carlyle Group