The top 5 FX pressures on UK Fund Managers [2025 research]

The FX landscape is becoming increasingly complex for UK fund managers. Based on MillTech's 2025 research, this blog explores the top five FX-related challenges facing UK fund managers today - from forecasting to credit access and regulatory demands - and how firms are adapting their strategies to protect performance in an uncertain market as their attention turns to 2026.

Key takeaways:

• FX costs are soaring: 95% of UK fund managers report higher FX expenses, with 77% seeing costs more than double in the past year. Cost transparency and control are now top priorities.
• Forecasting remains a major challenge: 27% of fund managers cite currency forecasting as one of their biggest operational hurdle, as volatility and macro uncertainty make hedging decisions more complex.
• Manual processes persist despite digital progress: 47% still execute trades by email and 45% by phone, but automation and AI adoption are rapidly gaining traction.
• Credit access is tightening: Over a quarter (27%) of fund managers struggle to secure FX credit lines with 55% facing stricter lending terms.
• Regulatory and compliance pressures intensify: 27% of firms name compliance as a top operational concern, with 32% turning to outsourcing.

 

1. The unrelenting rise of high costs

Recent data highlights the mounting challenge to manage FX expenses, with 27% of UK fund managers citing it as their primary operational challenge. Among smaller funds - managing between £74 million and £369.99 million - this rises to 39%.

This shift comes as a staggering 95% of UK fund managers’ have seen costs increase over the past year. For many, this isn’t just a marginal rise - 77% report cost surges more than doubling, with the mean increase reaching 69%.

CFOs are particularly exposed, facing a mean cost increase of 75%, and over three quarters (86%) say costs have risen by at least half.

As rising costs squeeze profitability, cost transparency has become a priority for 41% of fund managers. Without clear visibility into FX transaction costs, with fees often being hidden in the spread, firms risk overpaying for their FX execution and ultimately weakening returns.

 

2. Forecasting in a volatile currency market

In an environment of market turbulence, driven by shifting monetary policies and global trade uncertainty, forecasting existing currency risk now ranks as the biggest operational hurdle for 27% of UK fund managers.

The consequences of misjudging these exposures could be substantial. Over the past year, 95% of Fund Managers reported losses from unhedged FX positions, with 40% describing losses as “very significant.”

Macroeconomic uncertainty - particularly currency volatility linked to U.S. trade tariffs - continues to add complexity, with 37% of fund managers citing this as a key concern.

In response, firms are reassessing how they approach cash flow visibility and forecasting. Looking ahead, improving the visibility and forecasting of global cash flows has emerged as the top priority for managing international cash and FX risk over the next three years, cited by 23% of fund managers.

Without accurate forecasts, deciding how much to hedge - and when - becomes guesswork, forcing managers to strike a difficult balance between overprotection and underexposure.

 

3. The burden of manual processes

In an era of digital transformation, many UK funds remain reliant on manual FX processes. For 27% of fund managers, this dependence on outdated methods is a major operational pain point, consuming time that could be better spent on investment analysis and strategic decision-making.

The appetite for automation is growing rapidly. Fund managers are looking to automate key functions across the board which is no surprise when 47% are still executing trades by email and 45% by phone, limiting access to competitive rates and real-time market visibility.

“Manual processes may feel manageable day to day, but they’re increasingly unsustainable in a market that demands speed, accuracy and oversight. Each email or phone instruction adds risk, delay, and opacity to the process. By embracing automation, fund managers can gain real-time visibility, streamline execution, and free up valuable resources to focus on strategic decision-making rather than administration.”
Sam Hunt, CTO, MillTech

Artificial intelligence (AI) is also emerging as a powerful tool. While 25% of firms are already using AI in some capacity, a further 71% are considering it. A third of fund managers believe that a digital, multi-bank platform with advanced automation would best meet their firm’s future needs, signalling a clear trend toward more sophisticated, tech-driven operations amid a backdrop of rising costs.

 

4. The tightening grip on credit lines

The FX lending landscape is becoming increasingly constrained, creating new challenges for fund managers seeking flexibility in liquidity and execution. More than a quarter (27%) of fund managers now struggle to secure FX credit lines, with over half (55%) reporting that providers have tightened their lending criteria in the past year.

Chief Operating Officers (COOs) are feeling the squeeze most acutely, with 63% reporting stricter lending terms. Rising borrowing costs are compounding the pressure across the industry, with 64% of funds experiencing higher rates or fees in the past year.

In response, fund managers are re-evaluating how they access and manage liquidity. Automation remains a key theme, with 33% considering automating the onboarding of liquidity providers and 38% exploring automation in price discovery. These initiatives aim to make credit access faster, more transparent, and less reliant on a narrow group of traditional counterparties.

 

5. Navigating regulatory and compliance pressures

The expanding scope of regulatory and compliance requirements continues to challenge fund managers, with over a quarter (27%) citing regulatory and compliance pressures as a top operational challenges.

The consequences of falling short can be severe - non-compliance can expose firms to financial penalties, reputational damage, and increased scrutiny from regulators.

To help elevate these pressures, 32% of firms have turned to using outsourcing as a key leaver for managing risk and compliance. As regulatory and operational demands intensify, outsourcing allows firms to access specialist expertise and institutional-grade infrastructure without expanding headcount or system costs.

 

Conclusion

In a market defined by volatility, tightening credit, and growing regulatory pressure, fund managers are being pushed to do more with less. The need for better forecasting, clearer visibility into FX costs, and smarter access to liquidity has never been greater - and many are turning to technology and outsourcing to deliver that edge efficiently.

MillTech supports this shift by helping fund managers automate key FX workflows, enhance cost transparency through Transaction Cost Analysis (TCA), and strengthen access to liquidity via a multi-bank platform. By combining intelligent technology with specialist expertise, we help firms simplify processes and focus on performance in a fast-changing market.

 

Want to explore the research in detail? Download the full report for free here: The MillTech UK Fund Manager CFO FX Report 2025

Please refer to our Research Disclosure Page for more information on the data referred to in the above.