Automation, Increased FX Hedging, Focus for Buy Side in 2026: Survey

Corporates and fund managers are increasing their currency hedging activities thanks to sustained higher volatility, and are also looking at the cost side of the equation by increasing automation, according to a new survey.

The MillTech Global FX Report 2026 contains the usual paradoxes when looking at these sectors – namely the focus on automation existing alongside increased use of the telephone and email for instructing trades, as well as complaints about best execution accompanying similar sentiments about fragmented service provision – but it does seem as though, as MillTech CEO Eric Huttman notes in his introduction, corporates and fund managers are reacting to events that are “no longer temporary shocks but recurring features of the financial landscape”.

Huttmann adds, “What played out across markets in 2025, in our view, now looks less like an anomaly and more like a preview of the new norm.”

On the corporate side of the report there is little to surprise given it is just a week or so since MillTech released a corporate hedging report highlighting increased hedge ratios across UK and US companies. The global report also includes European respondents and across all three regions 88% hedge forecastable currency risk, up from 81% in the same report in 2025. Of those that are not hedging, 61% said they were now considering to do so, compared to just 43% last year.

When it comes to barriers to hedging risk, corporates seemed to have got the message that the cost of hedging is related to the level of volatility (and therefore exposed currency risk), with the number of respondents citing the expense of hedging as a barrier (26%) almost halving compared to last year (51%). “Burdensome hedging infrastructure” seems to be the biggest problem, with 53% citing this (up from 44% in the 2025 report), most likely reflecting the lack of internal processes. More firms (48%) believe that the capital used for FX hedging is better deployed elsewhere, last year this was 42%. Interestingly, last year’s report cited 64% of UK and 33% of US corporates citing insufficient credit lines – no-one seems to see this as a barrier in the latest survey.

Hedge ratios were 52%, up from 48% in last year’s survey, and ranged from 53% in the UK and Europe, to 50% in North America. While 31% of corporates plan to increase hedge ratios, up from 29% last year, 34% plan to decrease them (up form 30%). UK firms are more likely to increase hedge ratios (37%) than decrease them (30%), while European firms are more likely to decrease hedge ratios (39%) than increase them (24%).

Hedge lengths had a mean of 5.5 months, up from five months last year, with European firms locking in the longest at 6.1 months, UK firms at 5.52 months, and North American corporates the lowest at 4.9 months. The same ratio of respondents (62%) plan to increase their hedge lengths, with 11% planning to decrease them, up from 8% last year.

Unsurprisingly, given the volatility, just 4% report their cost of hedging has not increased, the majority (56%) report it rising by between 50 and 100% (but with 15% at 100%-plus).

The good news from the corporate section of the report is that when asked about challenges facing their FX operations, just about every segment was lower than in the 2025 report. The biggest, cited by 25% of respondents, was demonstrating best execution (down from 27% in the last report) and getting comparative quotes, which was also down from 27%. Next biggest concern was “fragmented service provision”, cited by 23%, down four points from the 2025 survey.

Operational risk is still high amongst firms, given that 34% (unchanged from the 2025 report) say they use the phone to instruct trades, 29% also use email, down from 32%; however an increased number, 38% versus 29% in 2025, use UIs, in other words, platforms, and 38% (from 29%) use their internal IT systems to instruct. APIs appear to be the least favourable option, with 25% using them, down from 26% in the last survey.

In what seems to be a perennial finding of any survey like this, firms continue to “consider” further automation, although notably a fractionally lower percentage 32% from 34% are looking at price discovery. More focus is on onboarding counterparties (33% from 28%) and reporting (31% from 27%), than the full FX workflow (31% from 32%), although automating trade execution rises to 33% from 32%). Inevitably, nearly all are looking at integrating AI into their processes at some stage.

Funds’ Hedging Strategies Variable

Meanwhile, the fund manager section of the MillTech report finds greater variation across the region, although again there are some familiar themes.

A slightly higher percentage, 87%, hedge their forecastable FX risk, up by one point from 2025, and of those who do not, 61% are “considering” doing so, up from 43% in the last survey. 77% of fund respondents say that have experienced losses from unhedged currency risk in 2025.

The same reason, “burdensome hedging infrastructure” is provided by 47% of respondents in the latest survey as the main barrier to hedging, up from just 29% in the last survey. This suggests a lack of investment in the risk identification and hedging workflow on the part of respondents. Roughly the same number – up one point to 37% – believe hedging is too expensive, while 46% (up from 41%) believe the capital could be better deployed elsewhere.

Average hedging ratios stood at 48%, down from 52% in the last survey, with European managers taking a more cautious approach by hedging a greater proportion of their exposure (54%). Hedging tenors followed a similar pattern, with the average hedging length rising to 5.38 months from five months. This rises to 5.7 months among European fund managers, who were more inclined to lock in rates for longer. In contrast, North American fund managers averaged shorter tenors of around five months

“Taken together, the broader trend points to a global shift towards greater protection,” the report states. “Nearly half (47%) of fund managers plan to increase hedging ratios, while 45% expect to extend hedging tenors, signalling a more defensive approach to FX risk in the period ahead.”

Overall 47% plan to increase hedge ratios (up from 37%) and 45% plan to extend hedge lengths (down from 59%). Conversely, 21% say they plan to decrease their ratio (from 17% in 2025), while 16% plan to decrease hedge lengths, up from 6% in the last survey.

Unlike in the corporate section of the report, fund managers signal increasing concern over one area of their FX business, although it seems a little strange given the services available. Just over a quarter (26%) cite proving best execution as their biggest challenge, up by three points from the last survey. Elsewhere, fragmented service provision 27%, and getting comparative quotes (26%), are both unchanged from 2025, while all other areas saw the challenge diminish.

Costs are still an issue for this sector, with minimising them cited by 35% of respondents (up from 28%), equally important was uncollateralised hedging, also cited by 35% and also up from 28% in the last survey. Automation at 38% (32%) is also seen as important by respondents, something that is highlighted by the finding that 45% instruct by email, up a staggering 14 points from the 2025 survey – equally, 40% use the phone, up by 11 points.

The good news is that automated instructions are also on the rise, 42% use platforms (up from 30%), while 41% use their own IT systems (28%) and 32% APIs (29%).

Elsewhere, 39% are considering automating price discovery (presumably those currently using email), this is up from 29% in the 2025 survey, while 38% (34%) want to automate the full FX workflow. Highlighting how more are looking at automation, counterparty onboarding and settlement both saw increased interest, by 12 points to 37% and six points to 37% respectively; while trade execution, up two points to 35%, risk identification, up four to 35%, and reporting, up six points to 34% also garnered responses.

Again, almost all are “considering” AI in some form, however, the UK continues to lag slightly, with a small proportion, 3%, not yet engaging with it. North America, by contrast, is ahead of the game, with 42% already using AI, well above the average of 27%. Beyond early adoption, half of fund managers (50%) are at least actively exploring how AI can be applied within their FX operations.

Something else that has been highlighted in previous MillTech surveys – the increased use of FX options – is confirmed, with 42% of respondents “significantly” increasing their usage and 50% “slightly” increasing. Just 2% have decreased usage and 7% use them to the same degree.