Hedging advisory firm of the year: Aegis Hedging Solutions

Energy Risk Awards 2023: Aegis helps clients compare and improve hedging strategies, launches industry's first hedging marketplace

Bryan-Sansbury
Bryan Sansbury, Aegis Hedging Solutions

Continuing commodity price volatility has raised the stakes for risk management programmes. Geopolitical friction, supply chain disruptions, rising interest rates, inflation and a host of other factors have resulted in an increased focus on hedging. But companies struggle to define how much they should hedge, for what time periods, in what structures and at what prices.

Step forward Aegis Hedging Solutions, a firm that guides customers through these decisions using advanced technology and nuanced trading expertise. The firm now serves more than 500 entities that do everything from oil and gas exploration to homebuilding to beverage production to making cheese.

“We are in the business of protecting profits for companies exposed to volatile commodity prices,” says Bryan Sansbury, chief executive of Aegis. “CFOs across multiple sectors are seeing commodity prices impact their P&Ls and recognising the importance of proactively managing the risk.”

In addition to growing its client base substantially, completing a significant acquisition and expanding its presence, the firm made many important technology-based advances over the past 12 months.

Notably, Aegis launched the industry’s first hedging marketplace – known as Aegis Sef – to deliver real-time price discovery across multiple swap dealers, apply standard rules and surveillance routines to transactions, enable integrated trade management, and comply with Commodity Futures Trading Commission regulations.

Since launching in September 2022, the Aegis hedging marketplace has added 19 swap dealers and more than 350 companies that have executed over 190,000 hedging contracts.

Aegis integrated its hedging marketplace with the National Futures Association and established connections to the Depository Trust & Clearing Corporation and Ice swap data repositories in 2022 – with plans to integrate with CME this year.

“We are incredibly appreciative of our customers and swap dealer partners who trust and execute hedging transactions on the marketplace,” says Chris Payne, president of Aegis Sef. “This has been a much-needed leap forward in technology to facilitate fair and efficient OTC transactions.”

Aegis also launched a proprietary hedge portfolio modelling capability based on patents owned by the firm. Customers can instantly track the projected impacts on their financial goals as prices move – an invaluable feature in the midst of market volatility. Aegis calculates the statistical likelihood of achieving financial goals using market-derived volatilities to simulate thousands of market scenarios. Importantly, it also produces an optimised set of hedge recommendations to increase the likelihood of success in an objective and mathematically defensible way.

Using these advanced analytics, Aegis recently worked with a private-equity sponsor of a natural gas producing portfolio company that wanted to reposition its hedge portfolio as natural gas prices declined. In just one step, Aegis was able to model and execute an unwind strategy by statistically solving for the set of hedges to replicate the risk and payoff pattern that previously would have required an expensive unwind and replace strategy. This saved significant costs and hedged volumes, and by leveraging integrated technology, the solution was repeatable.

To boost trading controls and efficiency for customers, Aegis also launched electronic trade approvals on its software platform – integrated with its hedging marketplace – so that a proposed transaction is entered once, approved by a customer and sent to the hedging marketplace for execution, with the resulting transaction recorded in the Aegis platform for storage, valuation and settlement. In addition to increasing efficiency, it also serves as an important control to eliminate the possibility of any key-entry errors.

“In a time where compliance, controls, and efficiency are at the forefront of finance organisations, we are excited to modernise the way hedging transactions are recommended, approved and executed,” says Trent Sansbury, chief product officer at Aegis.

Aegis believes it now likely has the largest energy hedge book in the world, after acquiring the financial hedging contracts of Asset Risk Management in March. The additional clients obtained from the one-time competitor give it more breadth, insight, and capabilities to serve all customers.

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