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Private Equity Funds — Cross-Border Investments & Capital Calls
Managing FX exposure on a EUR 200M acquisition and multi-currency capital call
Industry:Private Equity
Client:US-based private equity firm
Region:United States
Exposure:EUR 200M + CAD $40M
EUR 200M
Investment Size
CAD $40M
Capital Call
$5M+
Potential Savings
Background
A US-based private equity firm commits to a cross-border German investment closing in 2 months. The firm issues a 15-day capital call to Limited Partners — 80% US-based and 20% Canadian-denominated.
Products Used
Forward ContractsVanilla Call OptionsCollar Options
Challenge
- EUR 200M investment acquisition exposed to euro fluctuations
- CAD $40M capital call from Canadian LPs with currency risk
- Need to lock in rates before closing without deploying full capital upfront
- Balancing cost of hedging against potential adverse currency moves
Strategy
- Forward Contracts: Buy EUR 200M / sell USD at locked rate (60-day maturity)
- Forward Contracts: Buy USD / sell CAD for LP capital call (15-day maturity)
- Vanilla Call Option: EUR Call/USD Put for flexible upside participation
- Collar Option: Buy call and sell put to reduce premium cost to 0.65%
Outcomes
- EUR/USD hedge saved up to $5M+ in potential adverse currency movement
- CAD hedge protected nearly $1M in capital call proceeds
- Options strategies provided flexibility with controlled downside
- Comprehensive risk framework for future cross-border acquisitions
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