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Case Study

FX hedging for Capital Economics

  • Chris Towner headshot


    Chris Towner

    Managing Director
    FX Advisory

    Private Equity | London


A case study of how Chatham advised Capital Economics to optimally hedge the FX exposure from a multi-currency revenue stream and cost base.


  • Capital Economics is a leading provider of macro-economic research and analysis sold to clients on an annual subscription basis.
  • The business completed a secondary management buy-out in March 2018.
  • Capital Economics was introduced to Chatham by the private equity fund that invested in the business.
  • Capital Economics has a GBP cost base with revenue in a variety of foreign currencies.
  • A large proportion of the company’s sales are USD, causing an FX exposure.
  • Capital Economics did not have much relevant in-house treasury expertise and was looking to engage independent advice.

Our approach

  • Chatham explored FX forwards, options, participating forwards, and collars.
  • Settled on FX forwards, as the nature of Capital Economics’ business allows reasonable prediction of their USD cash flows.
  • Chatham also proposed use of a rolling layering programme of forwards (see below graph).
  • Chatham introduced two counterparties and obtained illustrative pricing.
rolling layering programme for fx exposure

A rolling layering programme to hedge FX exposure


  • The rolling layering strategy is straight forward and very effective, allowing Capital Economics to be 100% hedged in the short term, while maintaining flexibility further on.
  • Chatham ensured deals were done at agreed, fair and transparent margins.
  • Chatham assisted Capital Economics with counterparty selection, documentation and dry runs.
  • Capital Economics’ board was safe in the knowledge that the process was led by an independent and experienced team.

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About the author

  • Chris Towner

    Managing Director
    FX Advisory

    Private Equity | London


This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.