Fund Managers set up to Struggle as FX Challenges Increase, finds MillTechFX

The foreign exchange (FX) market in 2022 is far from stable. One of the FX as a service providers, Miltec FXsuggests that exchange rate challenges are set to increase, creating potential problems for fund managers.

MillTechFX finds that fund managers’ FX challenges are intensifying. The findings suggest that the growing threat of currency fluctuations is having a negative impact on investment returns.

of FX-based firm surveys 250 senior financial decision makers Fund managers are increasingly finding FX exposure from foreign currency assets, management fees, investor capital, and portfolio levels in recent years.

70% of respondents said the number of cross-border investments in their company has increased in the last five years. 66% claimed to have experienced an increase in non-base currency investors in the fund. A majority of respondents (93%) say FX is important to their business.

FX poses challenges for fund managers

MillTechFX found that these fund managers are currently devoting significant resources to their FX operations. More than half said he delegated forex-related work to three or more people. Despite the growing interest in FX, only 15% believe they are in the best position possible. In fact, 33% consider their FX settings to be below average or “worst in class.”

When senior fund manager decision makers were asked to list their biggest challenges, 35% said service delivery was fragmented. Other recurring challenges named are:

• Securing credit lines 34%
• Cost calculation 33%
• Forecast exposure 28%

How can companies address this issue?

Eric HutmanCEO of MillTechFX, explained some of the findings. he said: As a result, FX risk management has become a strategic priority for fund managers who need to protect their returns against currency movements.

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Despite this threat, fund managers still struggle with many issues regarding their FX setup, including best execution, operational inefficiency, transparency and governance. The majority are exploring new technologies and embracing digitization to streamline operational processes.

Looking ahead for the remainder of 2022 and beyond, we offer alternative, technology-driven solutions to help businesses put the right processes in place today, achieve best execution, and protect their businesses in these turbulent times. We recommend that you look for

Environmental, social and governance (ESG) investments were also found to be more important than the year before the survey. His 58% of fund managers wanted FX counterparties to have strong his ESG credentials. Another 36% say ESG is an important consideration. Only 6% did not consider ESG when making decisions.