How Ebury supported a private fund in managing its FX exposure

The client was a private fund established to pool capital from mainly Latin American and US investors to participate in an investment round for a Nordic agricultural business. The fund was denominated in the US Dollar (USD), whilst the investment was to be done in Swedish Krona (SEK). The time gap between the commitment and the investment funding meant the fund was exposed to USD/SEK foreign exchange risk. The fund, denominated in USD, would request capital contributions in USD, and multiple Limited Partners (LPs) would make contributions in Brazilian Real (BRL) and Argentine Peso (ARS). The time window to set up the fund, pool the capital, and fund the investment was four weeks. 

Introducing the Ebury Institutional Solution

The client had three main objectives in setting up its transactional banking and FX management setup:

Setup transactional account before fund closing 

The fund required a transactional USD account to fulfil its legal requirements and pool the capital of the LPs. The client onboarding and related Know Your Customer (KYC) and Anti Money Laundering (AML) checks were started during the fund’s establishment using draft fund documentation. This was done to complete the client onboarding and have the transactional IBAN details ready on time for the capital call collection and investment close deadline.

Manage FX risk due to the period between commitment and funding

Ebury provided the client with an unsecured FX credit line, allowing the fund to enter into an FX Forward in which the fund sold USD and bought SEK with a 30-day maturity. The FX credit line was approved during the fund’s establishment based on the draft fund and subscription documentation. The FX Forward ensured the fund was no longer exposed to fluctuations in the USD/SEK exchange rate and brought certainty to the LP’s USD commitments. 

Collecting capital calls 

Ebury issued the accounts in the name of the fund and enabled in-country collection of BRL and ARS from LPs. The fund manager was able to fix the relevant exchange rates on the Ebury Online platform before issuing the capital calls. 

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