Insights

A EUR-denominated fund has an opportunity to make a mezzanine loan to a UK borrower. The prospective borrower can accept a five-year mezzanine loan in British pounds (GBP) at three-month Sterling Overnight Index Average (SONIA) plus 600 basis points. The fund has a minimum return target of 6% IRR...

Once a currency risk hedging programme has been established, a manager’s risk management focus shifts to ensuring that the programme achieves its objectives in both risk reduction and maintenance cost, and that they deliver hedged performance profiles that investors expect. Tools and dashboards...

An FX option is an insurance policy, usually bought by way of a cash premium. It is deployed as a hedging strategy when flexibility is required and/or when its holder has a particular view on future currency movements.

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Diversifying the asset base geographically and earning higher yield from investing in different jurisdictions may be financially and strategically important to debt fund managers. In so doing, general partners (GPs) are exposed to currency risk on the asset side of the fund’s balance sheet.

Interest rate swaps are one of the tools that commercial real estate (CRE) borrowers can use to manage the risk associated with floating-rate loans. Borrowers choose to purchase swaps with the rationale that they are “free”, especially when compared to an interest rate cap that typically requires...

Download this in-depth guide to learn more about the use cases, pricing, valuation, and accounting implications of cross-currency swaps.

With only days to go until the final GBP LIBOR fixing, below is a short update on current state of transition and the emerging discussions on use of synthetic LIBOR.

In an environment when USD interest rates drop, many swaps become significant liabilities. In such a situation, companies can consider a blend-and-extend strategy, which reduces their swap rate to lower cash interest expense and extends hedge coverage by several years.

A guide to help understand frequently referenced topics and definitions of commonly used terms in hedge accounting.

Commercial real estate (CRE) lenders have begun to adopt SOFR and other LIBOR alternatives, presenting borrowers with different variations of these rates. This overview provides a summary of the common permutations of these rates and borrower considerations for each.

The Fed has started tapering its purchase of bonds, signaling a potential end to quantitative easing (QE). This has occurred in the context of a market that has pulled forward expected timing for a rate hike from the Fed. These factors have driven a rapid increase in hedging costs, particularly...

To choose the best interest rate hedging strategy, understand the pros and cons of derivative syndication as opposed to competitive auctions, direct negotiation and other alternatives.

To spot important data trends and crystalize them into actionable insights, corporate treasurers need robust reporting capabilities within their financial risk management systems. Advanced reporting tools should include a complete dataset, flexible-but-focused dashboards, and proactive trend...

We are often asked what we are seeing with respect to ESG terms or provisions in financings, derivatives, investment vehicle structures, etc. While a tremendous amount of attention is being allocated to ESG broadly across the global real estate markets, there is a wide variance of approaches,...

The sharp rise in interest rates in the last few weeks has shone a light on the risk of returns being eroded as the cost of debt assumed in an investment decision is now substantially higher than the original investment case. It has also led borrowers to look ahead to upcoming refinancings and...

A global retail company’s spreadsheet-based hedging process had become size-constrained and unable to expand with its growing global footprint, leaving the company materially exposed to new-market risk.

The global inflation story has captured the headlines as we emerged from COVID-19 lockdowns and economies reopened. There are different measures of inflation, showing different trends over different measurement periods. This piece considers the key market inflation measures and discusses how this...

As the date for the final GBP LIBOR fixing nears, the work from the banking and advisory community to transition all outstanding contracts from LIBOR to the new RFR is gathering momentum. We have previously published articles on the background to the transition and how borrowers should prepare....

As we wind down on summer 2021, many Americans are returning to the office and sending their children back to school. We recently reviewed the effects of COVID-19 on the U.S. economy and takeaways for the real estate market during our semiannual market update webinar. On September 15,...

It’s back-to-school month for most children, and back to the office for an increasing number of workers too. What better time to host our semiannual market update webinar for real estate? On 15 September, participants listened to our experts, Adrian Ng and Jamie Macdonald, provide an overview of...

Treasury teams increasingly rely on technology platforms to automate routine tasks, improve accuracy, and inform strategic decisions surrounding working capital, liquidity, and financial risk management. With an ever-growing ecosystem of technology platforms available to treasury and accounting...

Jerome Powell’s speech at the 2021 Jackson Hole symposium brings the market one step closer to a taper of quantitative easing. Shortly after the COVID-19 pandemic hit the U.S. in early 2020, the Federal Reserve slashed short-term rates to zero and began purchasing assets at a rate of $120 billion...

The Alternative Reference Rates Committee issued updated guidance regarding the scope of use for Term Secured Overnight Financing Rate (SOFR) derivatives.