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It has been twelve months since Hedgebook’s CEO, Richard Eaddy, packed his bags and headed to London to spread the Hedgebook gospel. The success over this time has validated Hedgebook’s relevance for the UK/European market and has provided the confidence and necessity to strengthen the team. This year, two new special humans have joined the UK office, tasked with deepening existing Hedgebook relationships and partnerships as well as creating new ones.

Nathan Cox

Nathan joined Hedgebook to lead our banking and broker partnerships in the UK. No stranger to FX markets, Nathan has more than fifteen years’ experience leading international business development and expansion projects for both the public and private sectors. Prior to joining Hedgebook, Nathan was the Head of Partnerships at a London-based foreign exchange brokerage. There he developed new partnership channels with financial and professional services partners to drive greater mutual business development and marketing outcomes. Nathan worked in New Zealand and Australia before settling in the UK where he has resided since 2007. As an Arsenal fan he covers his downside with ongoing support of the All Blacks.

Will Rush

Will joined Hedgebook at the start of 2018 to lead the business development efforts for Hedgebook Audit. Independent valuations of financial instruments is increasingly a focus for audit firms and Will is tasked with introducing these firms to an efficient and economic way to do it (https://www.hedgebookpro.com/hedgebook-audit/). Will brings his relationship building skills to Hedgebook with eight years business development and sales experience across the recruitment, outplacement and FMCG industries, most recently at an international recruitment business where he spent time working in Australia. He then came back to London to assist people who were looking to migrate from the UK to Australia or New Zealand eventually moving to business development for their HR consultancy arm. To build his domain knowledge he has immersed himself in technical accounting! Will is an avid rugby fan and still attempts to play, turning out for his local side’s 1st XV most weekends then hobbling in to work on Monday morning.

Welcome to Hedgebook!

Image result for also holding company

As Hedgebook spreads its wings to new jurisdictions, it is appropriate that this edition of Rickshaw features a non-Australian or New Zealand company.

ALSO’s head office is in Switzerland and provides a B2B market place for the Information and Communications Technology (“ICT”) industry. ALSO bundles logistics services, financial services, supply services, solution services, digital services, and IT services together into individual service packages.

With over 3,500 employees, EUR8 billion of sales and serving 15 countries across Europe ALSO is, by NZ standards, a large company. Although the size of the numbers is larger, the instruments used for hedging are the same.

As a user of interest rate swaps to manage the company’s interest rate risks, fair value of the derivatives is an important aspect of interim and year-end financial reporting (ALSO is listed on the SIX Swiss Exchange). Hedgebook provides these valuations as well as the hedge effectiveness testing aspect of hedge accounting.

The increased reporting requirements of the over-the-counter (“OTC”) derivatives market following the GFC has emphasised the need for strong systems. “Strong” does not have to mean “expensive” or “complex”. Hedgebook provides the valuations required for financial reporting obligations, with the minimum of fuss.

Given the low interest rate environment that global financial markets have been in for a decade it is understandable for borrowers to become complacent about managing interest rate risk. Hindsight is a wonderful thing, but I’m sure there are many finance professionals that would look back at decisions to hedge interest rate risk using pay fixed rate swaps with a tinge of regret, and are keen to have a larger exposure to floating rates. Interest rates have remained lower for much longer than many thought would be the case.

In response to this low interest rate environment, we have seen an increase in interest rate hedging activity using interest rate options. An interest rate option allows the borrower to enjoy low floating rates whilst also having some protection against higher rates. Many companies that use interest rate derivatives do so within the framework of a treasury policy. The interest rate hedging risk control limits enforce a minimum amount of fixed rate hedging to be in place at all times. Interest rate options, such as caps and collars, provide the dual benefit of qualifying as hedging but allowing the holder of the option to pay floating rates up to the level of the cap (and down to the level of the floor in the case of a collar structure).

In response, Hedgebook has developed interest rate option functionality so that these instruments can be appropriately recorded, reported and valued.

One of my favourite roles at Hedgebook is working with our awesome development team to deliver new, cool functionality for our users. Recently we have been working on the development of an interactive tool to aid interest rate hedging reporting and decision making. The inspiringly named (😉) Interest Rate Profile Tool (IRPT) replaces those clunky (and frequently erroneous) spreadsheets and provides information on future interest costs for budgeting purposes.

Here is an example of the IRPT:

The user can easily create alternative forecast debt scenarios (the yellow line in the chart) to stress test the impact on hedging levels and interest costs. This can be particularly helpful for those with increasing or decreasing debt profiles.

Hedgebook pulls through and displays the interest rate hedging policy (the solid (policy max) and dotted (policy min) black lines in the chart) for clear visualisation of the position. The table underneath the chart calculates the hedge profile versus limits and notifies the user whether the hedging position is policy compliant, or not. The profile can also be viewed at future dates e.g. key reporting dates, to avoid any future hedging versus policy limit reporting surprises.

All fixed rate hedging is included in the shaded orange area of the chart. This includes fixed rate bonds, interest rate swaps and interest rate options.

The green line is the forecast interest rate which is a weighted average of fixed rate instruments plus the unhedged component at market implied floating rates. By adding a funding margin Hedgebook calculates annual forecast interest rates and dollar costs, as displayed in the table below:

The Interest Rate Profile Tool is accessed from the main page of the Hedgebook app (below the Valuation Date field). We encourage users to have a play, let us know your feedback and get in touch if you need some help (help@hedgebookpro.com).

If you are not yet a Hedgebook user, you can contact us here to arrange a short, on-line demo: https://www.hedgebookpro.com/contact/

Peter Dickinson

Peter Dickinson

New Zealand based fintech company, Hedgebook, has successfully completed its latest funding round with a significant investment from experienced technology entrepreneur and leader Peter Dickinson. Peter joins Hedgebook as its newest shareholder and director.

Hedgebook’s CEO, Richard Eaddy, comments, “We’re delighted to add someone of Peter’s calibre to our Board, as we scale our treasury management software into offshore markets.

He is a proven builder of quality technology businesses. Peter’s input and knowledge will be invaluable as we enter this next phase of Hedgebook’s evolution.”

“I’m very pleased to be on board to add some ‘scale up’ expertise to the already strong Hedgebook team”, says Peter. “I look forward to helping the team realise the tech company’s potential and accelerate the impact Hedgebook is already making globally.”

Specialising in B2B business software, Peter has over 40 years founding, consulting and scaling technology companies. His achievements include leading and scaling ERP software Greentree to an eventual exit with global accounting software giant MYOB in 2016.

He continues to support the New Zealand technology industry as an investor and adviser for start-up companies through ICE Angels and Tuhua Ventures.

After being introduced to the company by New Zealand Trade and Enterprise, Peter was appointed a director in October 2017.

Greg Anderson, Richard Eaddy, and Roger Kerr, also directors of Hedgebook, are delighted to have Peter’s input into the strategic direction of the company, as it accelerates its growth in overseas markets. Focus has recently turned to the UK, adding a London office to the existing Auckland and Christchurch offices to meet the growing demand for its treasury management software.

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