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The sharp rise in the volatility of foreign exchange (FX) markets since the summer of 2014 has been felt across the board but particularly in emerging markets, of which sub-Saharan Africa represents one of the most challenging regions.
For GPs and LPs that have never invested in sub-Saharan Africa, FX hedging can present many pitfalls, not least the fact that sub-Saharan African FX markets are significantly less liquid than those of the developed world. Further, the wide range of FX hedging products available to investors in developed markets is unlikely to be available. This paper sets out the risks investors need to be aware of and how to mitigate them, where possible.
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