A report from FX-as-a-Service provider, MillTechFX, has revealed that over four-fifths (86%) of fund managers hedge their foreign exchange (FX), providing them with a “degree of protection from increased currency volatility due to rising geopolitical uncertainty.”
The MillTechFX Global FX Report 2025 analyzes the findings from surveys of 750 finance professionals at fund managers across Europe, the UK and North America, “revealing their FX strategies, the impact of domestic currencies, geopolitical influences, operational challenges and more.”
It reveals that fund managers hedge “52% of their exposure, with a mean hedge length of 5.4 months.”
In response to growing geopolitical tensions, European and UK fund managers are “increasing hedge lengths (56%), meaning they are locking in rates and certainty for longer.”
Of those that do not hedge, almost “half (43%) of fund managers said they were now considering doing so due to market conditions.”
The increase in hedging activity has persisted “despite rising costs, with 84% of fund managers facing higher hedging expenses.”
This was felt most intensely in Europe, where “88% of fund managers said hedging costs had gone up in the past year.”
Nearly nine in ten fund managers (88%) say their returns “have been impacted by their domestic currency, with those in Europe suffering the most (92%).”
Other key findings include:
- Europe leads the way on FX hedging – 91% of European fund managers hedge their currency risk, compared to 88% in the UK and 79% in North America.
- Dependence on manual processes – 31% of fund managers rely on email to instruct FX transactions, while 29% use phone calls. Fund managers in the UK depend most heavily on email (42%) and phone (35%). Manual processes were reported as the second largest challenge fund managers struggle with globally.
- UK credit crunch – 68% of UK fund managers suffered from tightened credit criteria, while 88% experienced rising fees. This was less of an issue in Europe, where 33% of fund managers experienced tighter access to credit and 60% experienced increased fees.
- AI and automation on the rise – Almost all European (96%) and UK (93%) fund managers are exploring the use of AI. Automation was the second biggest priority for European and UK fund managers – as a result, 34% of fund managers are actively considering automating their full FX workflow.
Eric Huttman, CEO of MillTechFX commented:
“The U.S. administration’s shifting policies and rising trade tensions are intensifying market uncertainty. Given the influence of U.S. policy on global markets, it’s no surprise that these dynamics are driving significant macroeconomic shifts particularly in FX markets.”
They further noted:
“Our research shows that the vast majority of fund managers globally are hedging their FX risk and protecting their bottom lines. We’re also seeing fairly consistent hedge ratios and tenor lengths, as firms move to lock in certainty for longer and ride out the storm. This is despite rising hedging costs which are putting many CFOs across the globe off as they decide to take their chances, rather than lock in security and forgo long-term protection for short-term gain.”
They added:
“For those that decide to hedge, it can seem difficult to implement. FX hedging has long been plagued by inefficiencies, hidden costs, and a lack of transparency, forcing CFOs to rely on outdated manual processes. However, a shift is underway as firms embrace tech-enabled solutions that digitise and automate the entire FX process, from onboarding to execution and settlement. Those who move away from legacy infrastructure stand to gain greater efficiency, cost savings, and control, while those who don’t risk being left behind.”
Nick Wood, Head of Execution at MillTechFX, commented:
“Currency volatility remains a defining theme in 2025, driven by tariffs, geopolitical tensions, and shifting economic policies. The strengthening USD reflects inflationary expectations and U.S. political divergence, while trade disputes and global conflicts continue to reshape capital flows. The return of President Trump has introduced a more transactional approach to foreign relations, impacting key alliances and market stability. Meanwhile, China’s economic strategy, Japan’s policy shifts, and political uncertainty in Europe add further complexity. As investors navigate these macroeconomic forces, currency markets are expected to remain highly reactive throughout the year.”