A new survey by Mill Tech reveals that 94% of North American fund managers are now hedging their forecastable FX risk, the highest level since the firm began tracking the data in 2023. Despite this increased caution, 97% of respondents reported losses from unhedged FX exposures, with average losses reaching $731,000. The rise in hedging activity is largely attributed to US policy uncertainty, which 98% of managers say has delayed investment decisions. Hedge ratios climbed from 45% in 2025 to 48% in 2026, while average hedge tenors lengthened from five months to five and a half months. Among those not currently hedging, 69% are considering adopting strategies due to market conditions. The shift in hedging behavior reflects broader concerns around US tariffs, central bank policies, and geopolitical tensions, particularly in the Middle East, which 31% of respondents cited as a key risk factor. Rising hedging costs are also impacting the industry, with 96% reporting increases over the past year and 60% seeing hikes of at least 50%. In response, firms are turning to automation, with in-house IT systems and UIs replacing traditional methods like email and phone communications for executing FX trades.

Eric Huttman, CEO of Mill Tech, notes that while increased hedging is a natural response to volatile markets, firms must also focus on optimizing their hedging approaches through technology to manage costs and improve transparency.

The survey underscores a growing trend toward more sophisticated risk management practices among US and Canadian fund managers.