Wealth & Finance International - January 2017

Wealth & Finance International 34 An Asset to Their Clients ur key philosophy is to add transparency to financial man- agement and hedging processes. We achieve this by shining a light into the dark box of derivatives! Background I launched Vedanta Hedging back in 2011 after I noticed that there wasn’t anybody giving independent hedging advice to businesses. This area was dominated by the banks and it became clear to me there were serious conflicts of interests when you receive advice from the same bank that is selling you the product. It is one of the only areas where a business owner is completely in the dark and wholly reliant upon their bank. In some cases, the banks insisted on a client having a hedge as a condition to a loan thus creating an obvious conflict. Fast forward to 2017 and we have now established ourselves as the largest FCA authorised derivatives advisor to SME’s in the UK. We have formally advised the FCA (our regulator) and the UK government, who have published our advice and recommendations on best practices on hedging for SMEs. For businesses, we help them to navigate through the complex area of Interest Rate or FX Hedging. Let’s not forget, even an innocent looking commercial fixed rate loan can carry significant breakage cost risk, so it is vital that a business fully understands these risks before they enter into any hedging transaction. On a day-to-day basis, we meet with clients, solicitors, barristers, finance brokers, accountants, MPs, Ministers, Lords and journalists, to help simplify hedging. This ranges from advising on complex hedge accounting implications in multi-jurisdictions across several currency pairs, down to assisting SMEs negotiate better terms on their new fixed rate loans. Documentation is another area that businesses can be bogged down with, ISDA, MiFID, EMIR, LEI and FATCA are some of the regulatory documentation that may need to be completed prior to transacting a hedge. We can remove this burden by helping in their completion, to avoid frustrating late minute delays, which in some cases can derail a transaction. Transaction benchmarking is another area that is often overlooked. Hedging products, be it a ‘Fixed Rate Loan’, Swap or FX Forward, move around every second of the working day, depending on the interbank rates at that time. This leads to opaque pricing, as a client will not have access to sophisticated derivative pricing models and live interbank rates. On this basis, how can you be sure you are receiving the best rate when you can’t do a real-time comparison? Our benchmarking service gives the client peace of mind that they are getting a fair price, and in some cases, we can even negotiate margins lower if we feel they are not competitive. Other areas where we can help, include hedge accounting and dispute resolution. Recently we have witnessed a surge in exotic FX structures being sold by banks and brokers, that are more often than not adding considerable risks to what should be a risk-reducing exercise. If a business believes it has been mis-sold any of these products, we can provide the technical support to assess the merits and the quantum of a claim. Success We have advised hundreds of firms (including a number of firms based in Europe and the US). So far, every one of our clients has received a settlement from their bank, without reaching trial. However, the terms of settlement are almost always confidential. On hedging, the Government has endorsed our advice on how SMEs should hedge their risks. We have also prepared hedging strategies which have been adopted by multiple AIM listed PLCs. Part of our bread and butter business is to make sure hedging products are priced fairly. Due to the recent volatility of Brexit, we are finding the banks are using this volatility to their advantage. Saving 0.14% on a £500k fixed loan may not sound a lot, but this actually equates to us saving the client just under £7000 in interest payments! Client base Our clients cover all sectors of business and they appreciate that whilst they are experts in their line of business, they are not derivatives ex- perts. Since we take the burden away from them in this area, our clients have always felt that we have added value to their business. We can save a business thousands in hedging costs and have clients who settle claims of many millions in derivative disputes. The biggest measure of feedback for us, is the fact that almost all of our clients are referred to us by other clients, or their advisors. Staff – a true asset Team Vedanta are a diverse bunch of investment professionals with extensive knowledge in all asset classes, covering all aspects of financial hedging. With previous careers ranging from corporate and investment banking, asset management, hedge funds and private banking, totalling 165 years, which allows Vedanta to apply this experience and rebalance the knowledge gap in favour of our clients. Vedanta Hedging is an independent, FCA authorised hedging advisor. We provide impartial advice and practical support to both retail and professional clients. We help all sizes of businesses ranging from small owner managed to large listed companies. O 1707WF28