This paper aims to explain the inherent foreign exchange risks which investors with overseas assets are exposed to, and explores ways in which they can be managed.
As ‘alternative’ asset sectors have moved towards maturity in the UK, investors are increasingly looking abroad to maintain the yields that first attracted them to the sector. Consequently, these investments are in currencies other than the one in which the investors report. As a result, they encounter FX risk when converting asset generated income back into the reporting currency.
By examining the FX exposure from the outset and devising a comprehensive financial risk management strategy, investors can be assured that KPIs will not be negatively impacted by fluctuations in exchange rates.