Asset managers can now benefit from a marginless currency hedging solution that enables best execution thanks to a new partnership between MillTechFX and Investec.
MillTechFX, the FinTech subsidiary of Millennium Global Investments, and Investec’s new marginless hedging solution enable seamless best execution across more than 10 counterpart banks without the cash flow constraint associated with funding initial and variation margin calls.
Instead, Investec, a global bank and wealth manager will take on the credit risk, while MillTechFX’s market will enable best execution, aiming to cut asset managers’ execution costs in half, said Eric Huttman, CEO of MillTechFX.
“We add extra flavor to the mix by solving two issues our clients have: enabling best execution while minimizing cash drag from margin calls., he explains, adding that clients can benefit from MillTechFX’s execution services while benefiting from Investec’s credit terms.
According to MillTechFX, the average investment life cycles for produced debt funds last up to five years, creating significant long-term exposure to currency risk, which is typically hedged using forward currency contracts. . However, these futures contracts can take a heavy toll on resources, with banks asking for initial guarantees – initial margin – and on a continuous basis – variation margin – which weighs on funds, with assets under management (AUM) being held back. respond to a margin call instead of being invested.
Using the combined solution from MillTechFX and Investec, Huttman says asset managers can now get the best of both worlds – they can keep cash from weighing down their fund’s performance, while managing currency risk.
“By partnering up, we believe we can resolve the constant trade-off that clients face – that of getting the best market price or the best credit terms in the market – while also providing the best market practices after the transaction. in trade cost analysis, ”said Sebastian Wright. , from Investec Risk Solutions.
Max Dobson, chief commercial officer at MillTechFX, said that Investec’s appetite for credit and Investec’s balance sheet, combined with its independent multi-bank marketplace, will help managers significantly reduce their risk and operational costs while also enabling them to demonstrate best execution and best practices to their investors. “This is the first of many strategic partnerships for MillTechFX, and we look forward to announcing more partnerships with innovative companies like Investec in the coming months.”
MillTechFX is an independent and comparative multi-bank foreign exchange marketplace for fund managers, institutional investors and corporate treasurers, focused on reducing their FX execution costs.