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FX hedging for Capital Economics
Case studies

FX hedging for Capital Economics

Background
  • Capital Economics is a leading provider of macro-economic research and analysis sold to clients on an annual subscription basis
  • The business completed a secondary MBO in March 2018
  • Capital Economics were introduced to JCRA by the PE house that invested in the business
  • Capital Economics has a GBP cost base with revenue in a variety of foreign currencies
  • A large proportion of the company’s sales are USD, causing an FX exposure
  • Capital Economics did not have much relevant in-house treasury expertise and was looking to engage independent advice
Our Approach
  • JCRA explored FX forwards, options, participating forwards and collars
  • Settled on FX forwards, as the nature of Capital Economics’ business allows reasonable prediction of their USD cash flows
  • JCRA also proposed use of a rolling layering programme of forwards (see below graph)
  • JCRA introduced two counterparties and obtained illustrative pricing

Benefits
  • The rolling layering strategy is straight forward and very effective, allowing Capital Economics to be 100% hedged in the short term, while maintaining flexibility further on
  • JCRA ensured deals were done at agreed, fair and transparent margins
  • JCRA assisted Capital Economics with counterparty selection, documentation and dry runs
  • Capital Economics’ board was safe in the knowledge that the process was led by an independent and experienced team
 

More case studies

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Private Equity July 2019
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IR Hedging termination
Private Equity July 2019
Case studies
Hedging of EUR refinancing
Private Equity April 2019

Contact us

If you need hedging or debt advice or would like to speak to the team, please get in touch.