Foreign Currency Risk Management Strategies for Impact Investment Funds in Frontier Markets

Small Foundation commissioned ISF Advisors to analyse available strategies for hard-currency funds in frontier and emerging markets to manage local currency risks. Based on this report, we are pleased to present an overview of common strategies and tools for local currency investing with options at both fund and investment level. Understanding each country’s monetary, economic and currency market dynamics is critical to making appropriate risk / return assessments for a balanced and well-managed portfolio. In addition, balancing types of instruments alongside individual investment risk factors can be important in determining the best strategy for portfolio construction.

We are pleased to share this summary report, and recommend readers consider this in conjunction with our first post on liquidity mechanisms and second post on design considerations for technical assistance delivery.