94% of North American fund managers now hedge their forecastable currency risk, the highest level recorded by MillTech since tracking began in 2023 and up eight percentage points year-on-year according with a new report from advanced FX and cash management solutions provider, MillTech.
The increase in hedging comes as 97% of North American fund managers experienced losses from unhedged FX exposure amid geopolitical uncertainty in Q1 2026. Funds lost an average of approximately $731,000, while 12% reported losses between $1 million and $4.9 million. Of funds that don’t hedge, 69% are now considering doing so due to market conditions.
Reflecting this more cautious approach, hedge ratios rose from 45% in 2025 to 48% in 2026, while average hedge lengths increased from five months to around five and a half months as managers seek greater certainty amid ongoing policy and geopolitical risks. This shift towards greater protection is set to continue, with more than a third of funds planning to increase their hedge ratios, while 63% intend to extend their hedge lengths.
The impact of this uncertainty extends beyond FX management, with almost all respondents reporting they had delayed investment decisions due to US policy uncertainty and more than a third delaying them significantly.
The MillTech North America Fund Manager FX Report 2026 analyses the findings from a survey of 250 senior finance decision-makers at fund managers across the US and Canada. The report explores how firms are adapting FX strategies amid policy uncertainty, dollar volatility, shifting rate expectations and rapid technological change.
US tariffs and trade policy and Federal Reserve or Bank of Canada rate policy were each cited by 34% of respondents as the biggest external factor influencing their FX hedging strategy. Middle East geopolitical tensions followed closely at 31%, indicating that funds are managing several overlapping sources of risk rather than one dominant driver.
Among the small group of respondents that do not currently hedge, burdensome hedging infrastructure was the most common barrier, followed by a preference to deploy capital elsewhere and cost. Cost pressures are also rising across the wider market, with 96% saying their hedging costs had risen over the past year and 60% reporting increases of at least 50%. The average increase was 57%, while 11% said costs had more than doubled. In addition, 89% reported that their credit provider had increased interest rates or fees.
Other key findings include:
Dollar volatility boosts returns despite unhedged losses – While the majority reported losses from unhedged FX exposure, 94% said dollar volatility had a positive overall impact on their fund’s returns from an FX perspective.
Digital FX instruction takes the lead – In-house IT systems and online user interfaces have become the most common methods for instructing FX transactions. This marks a shift away from manual forms of instruction, with email use falling from 60% in 2025 to 36% in 2026 and phone use declining from 53% to 31%.
Visibility leads FX operational challenges – Getting comparative quotes, forecasting existing currency risk and fragmented service provision are the primary operational challenges, pointing to a broader need for clearer pricing, stronger exposure visibility and more connected FX workflows.
AI adoption becomes more measured – All fund managers surveyed are considering deploying automation and AI, but just 14% said they were already using AI, down from 42% in 2025. This may reflect a shift in how firms define and assess live AI integration, with 31% citing cyber and privacy concerns as the biggest barrier to scaling adoption.
Eric Huttman, CEO of MillTech, commented: “North American fund managers are being pulled in several directions at once. Trade tariffs, shifting central bank expectations and geopolitical tensions are making currency moves harder to predict and investment decisions harder to make. The fact that almost every respondent suffered losses from unhedged FX exposure helps explain why hedging participation and ratios are moving higher. However, rising currency risks mean firms shouldn’t simply hedge more, how they hedge is just as important. They should use technology to improve pricing transparency, gain clearer visibility of their exposures and reduce the operational friction involved in managing currency risk to protect returns.”
