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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
 

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Contact us

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