MYTH: No need to focus on FX; it’s not what we’re paid to do, and given the limited alternatives, especially for Restricted Markets, we can just keep having the custodian do it.

FACT: By utilizing a passive model across multiple custodians, managers may forego significant cost savings and oversight from implementing a more effective program. Clients and stakeholders may not perceive a captive/custodian only FX program as doing what’s in the best interest of your investors, especially if alternatives are available.

Typically applies to: Global Equity

MYTH: Our FX performance and program management isn’t going to be looked at by stakeholders or potential clients.

FACT: As a global asset manager, it is important to have a holistic view of the full life cycle of the equity or fixed income trade, including the FX component. Managers still using a custody-only FX program need to be aware that FX is becoming a more prominent part of RFPs, specifically asking how they are effectively managing their FX demand including oversight and transparency. In addition, managers are now hiring or reallocating resources for specific FX Oversight roles, and in many cases working with external TCA firms to review execution quality.

Typically applies to: Global Equity; Global Multi-Assets, Alts

MYTH: As a large and sophisticated manager, we have the resources, knowledge and ability to take care of everything in-house without concern. It’s likely the small to mid-size managers that need to look at an outsourced FX solution.

FACT: In the last few years we have seen a noticeable change in the types of managers evaluating the efficiency and effectiveness of their FX program and what value they add by keeping the execution process in- house. Outsourcing is no longer a one-size-fits-all decision, even for the largest global investors. Especially on the restricted market front many of the largest managers are still using FXSI to manage these challenging and opaque markets. In addition, many large and sophisticated managers have made the decision to bifurcate their FX by asset class. For example, retain an active FX approach in-house for fixed income, while moving to a rules based Operational FX solution for equities and corporate action related execution.

Typically applies to: Global Equity; Global Multi-Assets, Alts; Global FI

MYTH: Equity traders and PMs don’t mind the added role of managing operational FX throughout their day.

FACT: Managers continue to look for new ways to optimize front office investment/trading staff to focus solely on core value-add activity – and not be distracted by operational FX (and perceived nuisance trades). “FX is not something we need or want to do in house; we prefer outsourcing this to the experts.”
– Current BBH FX client

Typically applies to: Global Equity; Global Multi-Assets, Alts

About BBH FX

BBH specializes in providing operational and strategic FX solutions to global asset managers. Our offering includes automated FX trading solutions for security and corporate action related FX, currency hedging, and active execution with BBH as a principal FX counterparty.