Talking Shop: Net Investment Hedging Programs

# Foreign Exchange

# Risk Management

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Member question: “Anyone have a net investment hedging program? If so, how often are you rolling hedges?

“What is your typical tenor? Are you hedging 100% or something less?”

Peer answer: “We have done some opportunistic NIH hedging in JPY with FX forwards. We generally use our EUR capacity for debt issuances as well. Hedges have been in the two- to three-year range.

“We will go up to 100% of capacity (we do not seek to push to the 125% mark that is allowed).

“We also believe it should be thought of as synthetic debt—that the currency being hedged should have real underlying cash flows (e.g., would be able to pay off the debt if issued locally).”

Talking Shop: Net Investment Hedging Programs

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