Carry Trade (Non U.S.)

Deploying Institutional Cash into High-Yield, FX-Hedged Local Markets

Non U.S. Yield Capture

Yield Generation from Non-U.S. Currency Deposits

In addition to its U.S. dollar-based strategies, Delta Money actively manages non-USD institutional balances by allocating capital into local currency fixed income markets in select emerging economies. Specifically, Delta allocates client deposits denominated in Kazakhstani Tenge (KZT) and Brazilian Real (BRL) into high-quality, short-duration local government bonds, as well as participating in the domestic repurchase agreement (repo) markets of Kazakhstan and Brazil. These markets offer structurally higher nominal interest rates due to local monetary policy regimes and provide an attractive yield pickup relative to developed market instruments, while maintaining sufficient depth and liquidity for institutional-scale deployment.

Currency Risk Management and Hedging Strategy

To ensure that these investments align with Delta’s global risk framework, all foreign exchange (FX) exposure is fully hedged back to USD. Delta employs a combination of forwards, futures, and options contracts, executed with tier-1 financial institutions to hedge currency risk associated with KZT and BRL holdings. These derivative instruments are strategically matched in maturity with the corresponding underlying debt instruments, ensuring that the hedge remains aligned with the duration of the investments. The hedging positions are continually rolled over to preserve the integrity of the hedge, maintaining consistent currency protection over time. This systematic hedging approach ensures that yield outcomes are not subject to FX volatility and are instead driven by the intrinsic return on the underlying local fixed income instruments. The hedging costs, which vary by market conditions and tenor structure, are actively monitored and typically range from 150 to 250 basis points (bps) annually, depending on cross-currency basis differentials and implied volatilities.

Net Yield After Hedging

After incorporating hedging costs, the net USD-equivalent yield generated from these strategies remains meaningfully positive. In the current environment, Kazakhstani sovereign and quasi-sovereign instruments and local repo rates yield approximately 11% to 13% in KZT terms, while Brazilian fixed income and repo markets generate 10% to 12% in BRL terms. After hedging expenses, the net effective yield to Delta in USD terms is estimated to range between 3.5% and 5.0%, depending on tenor, collateral structure, and prevailing basis spreads. These figures are re-evaluated regularly to ensure capital efficiency and continued adherence to Delta’s risk-return parameters. This net yield is systematically directed to Delta’s institutional users holding KZT and BRL balances, allowing them to capture yield without bearing FX risk.

USD-Denominated Bonds in Emerging Markets

In addition to onshore local currency strategies, Delta Money retains the flexibility to purchase USD-denominated bonds issued by emerging market governments or quasi-sovereign entities. This approach is utilized selectively when the net yield—after accounting for hedging costs on local currency instruments—is less favorable than the yield available from comparable USD-denominated securities. While such instruments typically offer lower nominal yields than their local currency counterparts, they eliminate the need for FX hedging, which can materially reduce overall costs depending on market conditions. When yield-adjusted comparisons support it, this strategy allows Delta to optimize returns while simplifying operational execution and preserving capital stability.

Institutional Yield Sharing Model

In line with Delta’s transparent and client-first operating model, the net yield generated from these non-USD strategies is fully passed through to Delta’s institutional users. This ensures that institutions maintaining KZT and BRL balances on the platform benefit directly from market-based returns on their holdings, rather than seeing their capital sit idle or earn zero interest. Yield distributions are aligned with the payment schedules of the underlying instruments—typically semiannual or annual for fixed income securities, and more frequent (often monthly or shorter) for repo transactions. All performance metrics are clearly reported and benchmarked for institutional clarity. Through this approach, Delta transforms what would otherwise be non-earning foreign currency balances into hedged, yield-bearing assets—without requiring clients to manage complex FX or fixed income exposures themselves.

Enhancing Global Liquidity Utility

Delta’s deployment into emerging market fixed income and repo markets not only optimizes yield across currencies but also reflects the platform’s commitment to institutional-grade cash management solutions. By combining onshore fixed income access, active FX risk mitigation, and a transparent redistribution model, Delta creates meaningful added value for its institutional participants. This global liquidity strategy reinforces Delta’s position as a trusted partner for institutions seeking capital efficiency, risk transparency, and yield enhancement — across both developed and emerging market currencies.