As the dollar continues to soften and currency volatility remains a pressing concern for venture capital firms, effective FX risk management is more critical than ever. In our recent webinar, two experienced VCs shared their strategies for navigating currency exposure across different aspects of their operations.
The Speakers
Nicholas (Nic) Lowden - Head of Finance @ Moonfire Ventures
Moonfire manages a USD-denominated fund while incurring operational expenses in GBP and EUR and also investing in EUR and GBP.
Mark Pettit - CFO @ Connect Ventures
Connect runs a GBP-denominated fund, but invests globally, often in EUR. That means currency volatility poses a risk to investments and exits alike.
The Three Main FX Risk Areas for VCs
Our speakers identified three main areas where FX risk can have the most impact on European VC funds.
Scenario | Risk | Impact |
Management fees | Fund in USD, expenses in GBP/EUR → quarterly conversions are unpredictable | 🔻 10% swing in six months wrecks budget planning
|
Investments | Cross-currency deals make capital calls volatile and hard to time | 🔻15–20% GBP surge during an EUR deal creates need for more pounds than expected
|
Exits | Deals take months to close, leaving plenty of time for FX to move against you | 🔻 EUR 50m exit, but EUR weakens → lose £2–3m
|
How They Manage FX
Management fees
Strategy Nic uses: Ranging
Set Upper Bound (Stop Order) → Protects your worst-case rate (i.e., your budget rate)
Set Lower Bound (Limit Order) → Takes advantage of better market rates
Trailing Stops → Locks in gains when markets move in your favour
Fully Flexible → Adjust your bounds anytime in seconds
Investments
For investments, both Nic and Mark use forward contracts to secure rates ahead of time.
When Moonfire commits to a deal:
They lock in a rate upfront using a forward trade
This avoids holding cash in foreign currencies…
And helps optimise LP capital and reduce FX risk before funds are deployed
Connect Ventures lock in exact rates ahead of time, matched to LP drawdowns.
Two-week forwards for tight timelines
No extra buffers, only hedging what’s needed
Trades aligned with capital calls to minimise risk
Mark's key insight: "We were seeing way more volatility in the FX markets over very short periods of time... that kind of caught us out a couple of times where we suddenly needed way more pounds than we thought. It was a 10% swing in a couple of weeks."
Exits
Exits often stretch over months, with local complications (like German notaries) making timing difficult to predict. Marc opts for ranging for exits too, to protect against worst-case scenarios, while leaving room for favourable movements.
Strategy Mark uses: Ranging
Set Stop (Upper Bound) → Protects against worst-case FX swings
Set Limit (Lower Bound) → Captures upside when markets move favourably
Trailing Stops → Lock in gains as rates improve
Fully Adjustable → Tweak in real time as timelines shift
The Bottom Line
Currency swings aren't just noise;, they can derail deals, distort returns, and complicate capital calls. Whether you’re managing £5 million or £500 million, the principles stay the same:
Know your exposure
Plan for predictability
Use the right tools to stay in control
Bound helps VCs take FX from an afterthought to an advantage with strategies built for how your fund actually operates.
Curious how it could work for you?
Book a quick call with one of our consultants or get a live look at the platform in action.
No opinion given in the material constitutes a recommendation by Bound Rates Limited that any particular transaction or investment strategy is suitable for any specific company or person. Results may and will vary. The information in this publication does not constitute legal, tax or other professional advice from Bound Rates Limited or its affiliates. Moonfire is an investor in Bound
Stay up to date with insights
Enhance your finance skills by learning from our network of top industry experts
