Hedging is a way for fund managers to protect positions against currency exchange rates. Instead of leaving investment returns open to currency shifts, managers can offset those shifts so that a move in exchange rates has a limited effect.
35% of funds plan to increase their hedging even further.
The survey drew responses from 250 senior finance executives in the US and Canada, with 158 from the US and 92 from Canada. The represented firms' managed assets ranged between $50 million and over $20 billion. The survey was conducted in June 2026.
US and Canadian money managers have become more active hedging their currency exposure as trade policy, central bank decisions, and Middle East tensions create unpredictable market. About one-third of respondents cited US trade policy and the likely direction of Federal Reserve and Bank of Canada decision-making. Another 31% mentioned Middle East geopolitical risk.
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"North American fund managers are being pulled in several directions at once," said Eric Huttman, CEO of MillTech, a currency trading and technology arm of Millennium Global Investments Ltd. "The environment, shifting central bank expectations and geopolitical tensions are making currency moves harder to predict and harder to make."
The main obstacles reported were a "burdensome" hedging infrastructure, a preference to use capital elsewhere, and the rising cost of protection, which increased by 57% in the twelve months to June.
MillTech added that US policy uncertainty reached far beyond currency markets and led 98% of respondents to postpone investment decisions.
The survey found that 69% of funds that do not currently hedge are now considering it.
Hedging relies on financial tools such as forward contracts or options to fix exchange rates, which lowers the uncertainty around future cash flows. For fund managers with international investments, currency movements can either amplify or erode returns, making effective hedging a critical component of risk management. The increase in the average hedge ratio to 48% indicates that managers are not only more likely to hedge but also hedging a larger portion of their exposure, reflecting a more cautious stance in the current macroeconomic environment. This shift underscores the growing recognition that currency risk is no longer a secondary consideration but a primary factor in portfolio performance, especially when geopolitical and policy shocks can trigger sudden and sharp currency swings.
Survey participants oversaw portfolios of varying sizes, with the smallest around $50 million and the largest surpassing $20 billion. The fact that most are now hedging a higher share of exposure suggests that risk management is moving up the priority list even for smaller funds. With the cost of currency protection up sharply over the past year, fund managers are weighing that expense against the potential for larger losses on unhedged positions.
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