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Currency structuring for fund-level acquisitions, distributions, and portfolio company FX, built for the timelines and reporting standards of institutional capital.
A deal signed today can close months later. If the rate moves in between, the equity check costs more than what was underwritten.
Exit proceeds and LP distributions rarely land on the same day the deal closes. That gap is real FX exposure on the way out.
Portfolio companies often carry currency risk of their own, exports, imports, intercompany loans, without anyone owning it.
A valuation modeled at today's rate can look very different at exit if the currency has moved.
A hypothetical example using illustrative figures.
UK-based fund agreeing to acquire a European target for a €200,000,000 equity check.
Without a hedge, the equity check costs £8,500,000 more if the rate moves against the fund before closing. Locking the rate at signing keeps the deal close to the price it was underwritten at, protecting £8,300,000 against that same move.
Currency exposure looks different depending on how your fund is structured.
With yields often running around 8%, currency movement isn't a rounding error, it's a direct hit to returns. Real estate funds typically carry exposure at both ends of a long hold: the acquisition, and years later, the disposal, plus any rental income collected in a currency different from the fund's base currency in between. Hedging the acquisition and structuring a plan for disposal protects a margin that doesn't have much room to absorb a bad currency move.
Beyond the fund-level exposure at acquisition and exit, portfolio companies often carry currency risk of their own, export revenue, imported inputs, intercompany loans between the parent and subsidiaries. That exposure sits inside the business itself and rarely gets managed unless someone at the fund level makes it a priority. It often goes unnoticed until a portfolio company's numbers get scrutinized ahead of a sale, at which point unmanaged currency exposure looks like inconsistent performance rather than what it actually is. Addressing it early protects portfolio company EBITDA and makes for a cleaner, more defensible story at exit.
Private debt introduces a layer of complexity the other structures don't have: the currency you lend in isn't always the currency the borrower operates in. A fund based in France or the UK making loans into Africa or Latin America is managing FX at origination, when the loan is disbursed, and again at every repayment. How that repayment is structured changes the exposure. A bullet repayment concentrates the risk into a single date, while monthly or amortizing repayments spread it out but multiply the number of conversion events you're managing over the life of the loan. Getting the hedging structure right means matching it to how the debt actually repays, not applying one approach across every facility.
Capital rarely moves in a straight line, it passes between the fund, GPs, SPVs, and portfolio entities, often crossing currencies more than once along the way. Each of those transfers is a potential conversion point, and an unmanaged one. Mapping where currency actually changes hands across your structure, not just at the LP or the exit, is often where the real exposure gets found.
A hypothetical example using illustrative figures.
A EUR-based fund originates a $2,000,000 USD bullet loan to a borrower in Latin America, repayable in 12 months.
Without a hedge, a weaker dollar at repayment means the fund gets back meaningfully fewer euros than it lent out, before counting any interest earned. Locking the conversion rate at origination protects the principal itself, so returns reflect the loan's performance, not a currency move over the life of the facility.