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FX Overlay for Institutional Clients

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The HSBC FX Overlay Infrastructure is designed around control, transparency and automation of FX risk management in your portfolio.

Share Class Hedging

Hedging the currency risk between the base currency of a fund and that of the investor,

  • to attract new investor groups in foreign markets using their domestic currency and offer a currency hedged investment return - used by Investment Managers to seek additional capital into funds
  • to offer flexibility to investors with a choice to select the investment hedged in a currency of choice

Through the use of efficient hedging models, the programme looks to mimic the benchmark / base class of the fund and minimise any tracking error as much as possible. These can be performed at investor level but also in the form of look through hedging, whereby a secondary step is taken to ‘look through’ the portfolio to ascertain the required hedge ratios based on the underlying foreign currency exposures. Another alternative is to use benchmark methodology and index/basket currency weights.

Portfolio Asset Hedging

Asset-level or portfolio-level hedging of non-domestic currency denominated assets at a predefined client chosen hedge ratio to help reduce currency risk:

  • Reduce portfolio volatility attributed to unwanted currency risk
  • Continuous control / analytics to measure the efficiency of the hedging program to optimise risk and return
  • Achieves cost efficiency by applying a centralised and transparent hedging setup
  • Can be combined with various levels of portfolio look through, indexing, etc.

Dynamic Asset Hedging

Dynamic strategies are designed to actively adjust the hedge ratio to achieve an asymmetric risk profile, that aims to reduce cash flow risk from the hedging strategy and generate an outperformance compared to passive hedging strategies.

HSBC supports a suite of different FX strategies, either developed by HSBC, third party investment managers or those created by our clients themselves. HSBC manages the daily implementation of those strategies in an outsourced business model.

Our product solutions are fully supported by our FX Overlay technology and proven risk management workflows. Given our high level of automation we aim to deliver an efficient and cost-effective implementation of the desired FX hedging framework.

Our clients keep full control of the hedging programme at all times, whilst HSBC provides not only the fully outsourced hedging workflow but also various reports and analytics to support supervision and governance activities. This includes transparent reporting on the daily activities, data on risk and return, best execution and – if needed – bespoke analytics and scenario / simulation analytics.

From a liquidity management perspective HSBC can help to find solutions to enhance the cash flow impact of the hedging programme. This can include specific CSA solutions and/or other financing related products for investors with liquid or private assets.

Learn more about the value add services in our FX Overlay offering.

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HSBC FX Overlay

FX Overlay is an automation and outsourcing solution to help HSBC's clients improve FX hedging efficiency, reduce operational risk and increase transparency.

FX Overlay for Corporate Clients

HSBC FX Overlay provides a unique infrastructure to automate your FX workflows and allows access to industry-leading FX hedging strategies.

Innovative Infrastructure and Automation of FX risk management

HSBC FX Overlay supports you in choosing the optimal FX strategy. We then implement it, comprising calculation, execution, reporting and liquidity management.


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