North American Fund Managers Hit Record FX Hedging Levels Amid $731,000 Average Losses

Quick Summary

North American fund managers are adopting FX hedging at record levels, with 94% now protecting forecastable currency risk. This surge follows significant Q1 2026 losses, where 97% of managers suffered from unhedged exposure, losing an average of $731,000 due to geopolitical uncertainty and shifting trade policies.

Why are North American fund managers increasing FX hedging?

FX hedging has become a necessity rather than an option for asset managers facing extreme market volatility. According to MillTech research, 97% of North American fund managers suffered losses from unhedged exposure in the first quarter of 2026. These losses were not marginal; the mean loss reached $731,000, with over 10% of firms reporting hits between $1 million and $4.9 million. As a result, hedge ratios have climbed to 48%, and managers are extending the duration of their protection to an average of five and a half months.

• 94% of managers now hedge forecastable risk.
• 69% of non-hedgers are currently reconsidering their strategy.
• 63% of firms intend to extend their hedge lengths further.

How is policy uncertainty impacting investment decisions?

The report highlights a staggering correlation between US policy uncertainty and capital stagnation. A massive 98% of senior finance decision-makers admitted to delaying investment decisions, with 35% citing significant delays. The primary drivers for this hesitation include US trade tariffs and fluctuating interest rate policies from the Federal Reserve and Bank of Canada. This environment has forced a shift toward digital FX instruction, as firms move away from manual phone and email processes to gain better visibility and speed.

• 34% cite tariffs as the top external risk factor.
• 96% reported increased costs for hedging over the last year.
• 57% average increase in the cost of executing hedges.

What are the operational challenges in managing currency risk?

Despite the move toward protection, firms face significant operational friction. The most prominent hurdles include obtaining comparative quotes and forecasting existing risk across fragmented service providers. Interestingly, while AI adoption is being discussed by all surveyed managers, live integration has dropped to 14% as firms grapple with cyber and privacy concerns. Eric Huttman, CEO of MillTech, emphasizes that "rising currency risks mean firms shouldn’t simply hedge more, how they hedge is just as important."

"North American fund managers are being pulled in several directions at once. 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." said Eric Huttman, CEO of MillTech.

FF NEWS TAKE:

This data confirms that FX hedging is no longer a back-office afterthought but a front-line defensive requirement. The $731,000 average loss is a wake-up call for the industry. While the shift to digital instruction is a positive move for transparency and execution, the rising cost of hedging (up 57%) suggests that banks and providers are squeezing margins just when managers are most vulnerable. This moves the needle by highlighting the urgent need for automated, multi-bank liquidity solutions.