North American Funds Hedging FX at Higher Rate: Survey

The latest survey of North American fund managers conducted by MillTech finds that while 94% of respondents are hedging their forecastable FX risk, 97% have suffered losses from unhedged FX exposures, with mean losses hitting $731,000.

At 94% hedging, the ratio is the highest since MillTech started conducting the surveys in 2023 and is up 8% from the same period in 2025. A large factor in this could be US policy uncertainty, for while the survey does not directly address the FX issue, it finds that 98% says the uncertainty has delayed investment decisions more generally.

Some firms experienced higher losses, 12% reported losses between $1 million and $4.9 million. MillTech says of funds that don’t hedge, 69% are now considering doing so due to market conditions.

Reflecting this more cautious approach, MillTech says hedge ratios rose from 45% in 2025 to 48% in 2026, while average hedge lengths increased from five months to around five and a half months as managers sought greater certainty amid ongoing policy and geopolitical risks. That said, the average hedge ratio was 50% in 2023 and 55% in 2024.

The shift in hedge tenors was notably away from the most popular basket – from 71% hedging four-to-six months in 2025, this basket fell to just 44%, with one-to-three months (24% from 15%) and seven-to-nine months (24% from 13%) taking up much of the slack. Equally, those hedging 10-12 months out rose to 8% from just 1% in 2025.

MillTech says the shift towards greater protection is set to continue, with more than a third of funds (35%) planning to increase their hedge ratios, while 63% intend to extend their hedge lengths.

US tariffs and trade policy and Federal Reserve or Bank of Canada rate policy were each cited by 34% of respondents as the biggest external factor influencing their FX hedging strategy. Middle East geopolitical tensions followed closely at 31%, indicating that funds are managing several overlapping sources of risk rather than one dominant driver.

Among the small group of respondents that do not currently hedge, burdensome hedging infrastructure was the most common barrier (56%), followed by a preference to deploy capital elsewhere (38%) and cost (31%).

Cost pressures are also rising across the wider market, with 96% saying their hedging costs had risen over the past year and 60% reporting increases of at least 50%. The average increase was 57%, while 11% said costs had more than doubled. In addition, 89% reported that their credit provider had increased interest rates or fees.

There are, finally it has to be said, signs of greater automation in the industry, the survey finds that in-house IT systems (50%) and UIs (42%) have become the most common methods for instructing FX transactions, marking a shift away from manual forms of instruction, with email use falling from 60% in 2025 to 36% in 2026 and phone use declining from 53% to 31%.

“North American fund managers are being pulled in several directions at once,” observes Eric Huttman, CEO of MillTech. “Trade tariffs, shifting central bank expectations and geopolitical tensions are making currency moves harder to predict and investment decisions harder to make. The fact that almost every respondent suffered losses from unhedged FX exposure helps explain why hedging participation and ratios are moving higher.

“However, rising currency risks mean firms shouldn’t simply hedge more, how they hedge is just as important,” he adds. “They should use technology to improve pricing transparency, gain clearer visibility of their exposures and reduce the operational friction involved in managing currency risk to protect returns.”