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GLOBAL MACRO & CURRENCY MANAGEMENT

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MULTI-CURRENCY LIABILITY MANAGEMENT Programme

Managing the Risks

What Are The Risks?

  • Borrowing in foreign currencies carries an inherent and significant foreign exchange risk.
  • The debt will increase if the currency in which it is held strengthens against the base currency.
  • The base currency value of a liability will fluctuate while it is in the programme.
  • Clients must be able to tolerate a 15% to 25% increase in the size of their debt (although any increase in debt is limited to Conversion Limits (see below) pre-agreed by the client and the lending bank),

SEE FULL RISK WARNINGS

How Are These Risks Managed?

  • ECU's experienced Investment Team manages debt on a portfolio basis with the principal aims of limiting the scale of currency losses and maximizing gains. "Portfolio basis” means that all clients participating in the programme have the same currency exposures at all times.
  • A lending bank will set a level, the 'Conversion Limit', typically 15% to 25% above the initial loan value, at which it has the right, but not the obligation, to convert the multi-currency loan facility back into the base currency to prevent further currency losses.
  • A Client may terminate ECU's mandate and have their loan converted back into the base currency at any time in order to ensure that they are no longer exposed to foreign exchange risk.

RISK MANAGEMENT POLICY

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