Markets by Trading view

Impact funds battling elevated FX risks, warns Ebury Institutional Solutions


  • Impact funds and those investing in Frontier Markets face greater exposure to FX risk and currency volatility despite sitting on $73 billion of dry powder
  • Ghanian Cedi saw a 113% swing against the Sterling in 2022, with GBP ending the year up 48%
  • Ebury Institutional Solutions calls on these funds to maximise returns and impact of investments by reviewing their hedging services

Currency volatility could be significantly damaging the returns and investment potential of impact funds as well as other alternative investors deploying capital across Frontier Markets according to Ebury Institutional Solutions (EIS).

While impact funds are sitting on an estimated $73 billion of dry powder and there may be many exciting investment opportunities, there are also myriad risks and complicating factors throughout the investment journey.

FX risk has traditionally been a major barrier to entry, particularly given traditional banking providers provide minimal coverage of the less mature currency markets which are also characterised by wide swings and illiquid trading.

This can leave funds exposed to the spot market for the duration of their investment and create difficulties when looking to repatriate capital after exit.

The Ghanian Cedi, for example, experienced 113% volatility through 2022 with the Sterling ending the year up 48%, demonstrating the potential for losses when exiting an investment if left reliant on the spot market. Such a swing would cause a fund considerable uncertainty or significantly erode total returns, while the likelihood of such swings may deter any investment in the country.

While traditional providers may struggle to meet the needs of the impact investment sector, Ebury Institutional Solutions have seen growing demand from these funds leveraging Ebury’s expertise and solutions that cover a wide range of exotic currencies.

Jack Sirett, Partner at Ebury commented, “We have seen rapidly growing demand from investment funds that invest in Frontier Markets for solutions to the problems they face around FX risk management and the currency volatility associated with traditionally illiquid markets.

“Impact funds are reliant on maximising the potential of the capital they deploy in these countries yet can struggle hedging capital flows with traditional banking providers. It is a serious obstacle to investing in Frontier Markets because it means they are left exposed to the spot market for a prolonged period of time.

“We urge impact funds and other alternative investors to explore their FX services to ensure they have appropriate hedging solutions in place. This can provide the catalyst needed to take advantage of the significant investment opportunities across Frontier Markets.”

About Ebury

Ebury is a global financial services firm that empowers businesses of all sizes to trade and grow internationally with ease by removing global barriers. It provides unified solutions across international payments and collections, FX risk management and strategies in over 130 currencies for major and emerging markets, cash management strategies and business lending.

Ebury was founded by Juan Lobato and Salvador García in 2009 and demand for its services has driven significant international growth with over 1,300 employees now operating from 32 offices in 21 countries. Backed by top-tier investors and regulated by the Financial Conduct Authority in the UK, Ebury transacts over $21 billion annually.  

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts


Sign up for our free newsletter and receive the latest banking and fintech stories, straight to your inbox - every week