If an academic group receives a multi-year grant denominated in a currency different from that that they pay salaries, can they use some of the grant to hedge against changes in the relative value of the two currencies?

Some years ago I was a member of a group in the UK that received a substantial five year grant from the US. Between the awarding of the grant and the time we started employing staff the pound dropped against the dollar, meaning we could have employed more staff than we originally estimated. However, because of the risk that the exchange rate reversed over the time of the grant the "bean counters" did not let us take this option. In the end the pound remained somewhat low and we had excess money in the grant in the final year. The project could have been much more productive if that money had been spent on more staff in the beginning.

If this was a private company they would have the option of hedging the risk, ie. taking some position on the currency markets such that whatever the exchange rate does the money available would be roughly similar. Is an academic group allowed to take such a futures position in the forex markets?

While I am not in this situation at the moment, considering the substantial drop in the value of the pound that has occurred since the July NIH funding round I suspect many people are, and the magnitude of the change is much greater than has occurred in recent years.

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    I have never heard of a funding agency which would allow 'bets' on the currency markets (or stocks, bonds, etc). Not to mention it would need to be the organisation holding the funds to make these transactions. So either the funding body or University would need to have an account with access to the money markets and be willing to manage these investments (with the associated administrative/tax implications).
    – atom44
    Sep 27, 2022 at 10:17
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    Profit and non-profit endeavors have different goals, money management and corresponding regulations. It is not only about “i wish i can do this or that”.
    – Greg
    Sep 27, 2022 at 10:44
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    Most comments and the first answer miss the point that the proposed hedging is not a plan to invest and hope for an increase in funds but to eliminate the risk of changes in the currency exchange rate (up or down!) This is a common thing when one has costs in currency X but gets paid in currency Y. rbcgam.com/en/ca/learn-plan/investment-strategies/… Sep 27, 2022 at 15:03
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    I think a lot of the people responding here are getting hung up on your use of the word "bet". A hedge is a financial transaction made to reduce your exposure to some risk rather than to increase it; it is not a bet, nor is it generally imprudent in the way that betting, gambling or speculating is generally considered to be. You might get better responses if you remove the word "bet" from your question.
    – kaya3
    Sep 28, 2022 at 7:39
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    In this scenario you have enough money to employ more people, and you risk losing that money, so insuring it is perfectly responsible (though that doesn't mean the funding body would necessarily allow it). From another perspective, the reason you have more money than you expected to have is because you were exposed to exchange rate risk, which could have gone in the other direction and crippled the project, so one might say the project's finances were being mismanaged by not hedging the exchange rate risk sooner.
    – kaya3
    Sep 28, 2022 at 7:41

6 Answers 6


As usual, it is impossible to answer questions of the form of "is XYZ allowed with grants?" with certainty - the answer to any question like this will always be "that depends on the rules of the organization providing the grant as well as on the rules of the organization receiving / managing the grant".

That said, for this specific question I feel fairly confident to say that universities will generally not allow you to speculate with grant money, or invest them in the financial market in some other manner. Grants are given for specific purposes (this makes them different from, say, donations) - sometimes these purposes may be abstractly formulated, but never sufficiently abstractly that "invest it in some other company" would be covered. At the end of the day, if an organization gives you money to (for example) hire grad students you actually need to hire grad students - not invest the money, hope for higher returns, and then hire even more grad students (or alternatively hire less or no grad students if the investment goes bad).

However, because of the risk that the exchange rate reversed over the time of the grant the "bean counters" did not let us take this option. In the end the pound remained somewhat low and we had excess money in the grant in the final year.

Realistically, stories like this are the exact reason why grants (even personal grants) are usually submitted to universities to manage and not directly to researchers - the "bean counters" as you call them are sufficiently experienced (and sufficiently disinterested in the outcome of any specific project) to make objective financial decisions that do not get the project, university, or PI into troubles, whereas we scientists may sometimes get a little carried away with positive possibilities without considering the risks.

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    Hedging is the opposite of a speculative "bet"; see user2705196's comment under the question. My understanding is that with hedging to cover the risk of the exchange returning to the old value, in the worst case they could still spend more GBP than if they'd effectively converted all the grant money at the start (at the worse exchange rate). If the exchange rate goes back up, their hedge "wins" and provides the extra GBP. If not, then it loses but the favourable exchange rate means they still have enough GBP to cover it + salaries. Sep 27, 2022 at 19:40
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    -1 The question is effectively just asking whether the researchers have to convert USD to GBP immediately, or whether they can wait until they need the money.
    – user253751
    Sep 27, 2022 at 21:23
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    @user253751 Usually you don't "have" that money beforehand, though. You get it in tranches, either at the start or the end of a year. So the university would need to buy the respective amount of USD at the beginning of the grant period. I'm not sure why that wouldn't be, or at the very least be perceived as, a forex speculation. That you do it to hedge some other risks will not make a real difference, in my opinion.
    – xLeitix
    Sep 28, 2022 at 6:52
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    Hedging is equivalent to being concerned your lab may burn down and buying insurance against that event. Would it be inappropriate to buy insurance with grant money? Sep 28, 2022 at 17:56
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    @RichardTingle Yes, it would, because the institution already handles such insurance arrangements. For all we (and the OP) know, they likewise have some sort risk mitigation plans for exchange rate fluctuations. If they do, then the last thing they want is for individual PIs to be buying their own, likely redundant, insurance, especially if those PIs don't have any particular expertise in such things.
    – Nobody
    Sep 30, 2022 at 13:52

Though I'm in the US and not the UK, my impression that in both places academic groups do not handle money, their institutions do.

US government grants, in particular, are always to the institution. The PI and other staff don't have any authority to spend the money directly, it's up to the institution to manage the money. In your case, the institution decided to be conservative and did not let the group spend more pounds early in the grant than were originally budgeted. An alternative might be to make exchanged funds available on an annual basis (or whatever schedule the funds are actually received on). I could see that as a potential challenge if you work in a place where the employer has restrictions on when they can release paid staff: if you can't drop an employee tomorrow that you're paying today, you have to be sure you'll have the money to pay them tomorrow, too.

Large universities have their own financial clout and though there may be some restrictions on those operating as public entities (which would vary by jurisdiction), academic institutions manage their money much like a company does, through investments and relevant hedges in their endowments, retirement funds, etc.


From the guidelines for grant applications at https://www.ukri.org/wp-content/uploads/2020/09/BBSRC-051020-Funding-opp-20ALERTJustificationOfResourcesDoc.docx:

If quotes are provided in foreign currency the exchange rate used to convert it to GBP should be clearly stated. The exchange rate at time of submission should be used, BBSRC-UKRI cannot account for changes in exchange rate between submission and award of the grant.

It's not clear whether this applies to funding from all the UK Research Councils, or just from BBSRC.

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    That's interesting but it doesn't really address the question.
    – psmears
    Sep 28, 2022 at 9:33
  • @psmears It seems to me to be a pretty clear "no" to the question as asked, for the grants to which it applies. Sep 28, 2022 at 16:18
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    No, that's a document saying how to justify what you're going to spend money on, and it's saying they won't adjust your grant if the exchange rate changes between them accepting your grant application and you needing to purchase something in foreign currency. It doesn't say you can't purchase a hedging contract (and nor does it say you can).
    – psmears
    Sep 28, 2022 at 21:18

Explicitly hedging as in financial institutions? No. I would be surprised if any grant funder or fundee would allow that.

Are potential currency fluctuations taken into account when writing and executing on grants? At least sometimes, if they are done well and involve multiple currencies.

This could include:

  • moving work between partners
    • e.g. having a UK group do an expensive experiment and the US lab doing a cheaper one
  • bringing expenses forward or back in time
    • e.g. buying equipment now even if it won't be used immediately
  • changing currencies of purchased goods and/or services
    • e.g. paying a subcontractor in a third country to build a website with dollars instead of pounds
    • e.g. moving a conference/meeting venue to a country with a favourable currency

That's not "hedging" in the forex sense, but it is building options into the structure of the project to react to future currency movements.

Even without currency fluctuations, research is by nature uncertain; the 1000 Genomes project ended up with about 2,500 genomes for example, partly because the technology got cheaper to run faster than expected over the course of the project (and currency was probably a part of that).


Professional "bean counter" aka "research administrator" here with 12 years' experience at top US research universities, having managed funds at more than 20 US Federal agencies and dozens of industry sponsors and foundations.

Your question sounds inflammatory, but it actually is a good question on how income is allowed to be handled. There are regulations in the US about how income is allowed to be distributed (i.e., can the institution get it up front and also keep it). I have seen some private agencies allow us to keep the interest on our income, and at my institution it goes back to the PI when the grant ends. I know of one foundation that required us to refund the interest to them and any interest we received on unused funds! (Why did we accept such a stupid grant??)

The way the feds get around this entire question is by not giving the money upfront. Because Uniform Guidance pushes the cost reimbursable model, there is no interest to worry about. There are however federal accounts that also give fixed price, often via SBIR/STTR mechanisms.

The way many academics handle uncertainty in funding is to run a deficit upfront, but this carries certain risks. Let's say you have a startup of $1M. You can overspend year 1 funding on many (most?) federal grants knowing the deficit carries forward nearly always. However, let's say your contract is with IARPA and they aren't interested in Phase 2 funding. They cancel the project and you are out of pocket on your over-expenditure. Not a lot of PIs can gamble on such levels, but it happens at top institutions from time to time.

If you need to start spending before a contract is in place, many institutions call this an "advance account". Depending on funding this may or may not be controversial. I work with CS and Engineering right now and with MURI funding I always run a deficit to ensure we get our next increment and expense for the costs we have today. I usually am more worried about underspend than overspend. This is frequently because PIs don't ramp up their spend right away, we end up behind enough to lose the next increment. Most agencies want less than 25% remaining to award more. I can implement this strategy because I'm at a top school. Other places can't do this and uncertainty is a real problem, sometimes with no solutions.

My request to all PIs with US federal funding is to read all terms and conditions (NIH has the Grants Policy Statement; NSF has the PAPPG) including the larger federal Uniform Guidance for grants and FAR for contracts. If researchers took an interest in the rules, my job would be much easier. A lot of these questions are answered therein. Look into "carry forward" or "carryover" rules. Running a deficit is an actual strategy if your institution allows it (see above-mentioned risk).


Any organization that accepts a grant receives a check or transfer from the funding organization. The organization has rules on how that money is to be spent. Indeed, grants are considered projects.

The institution is effectively saying "in exchange for this much money, our investigator will do the research described in the grant." Either periodically, or at the end of the contract, the funding institution checks up on things to make sure things are going as planned. If the institution has real problems with interim reports, the next check may never come.

Obviously, research being research, not all of it works out, and institutes are fine with this. Institutes will not be fine with a report that says "yeah, I know you gave us $250,000 USD, but we tried to leverage that into $350,000 USD by speculation, and it failed, so we were only able to spend the $125,000 that we were able to recover". The institute does not expect you to spend money they didn't give you (unless part of the contract was matching funds, or some such), but they expect you to make reasonable efforts to spend the money they do give you the way you said you would.

Taking the money given to the Uni and putting it in some account for speculative pursuits is most likely not allowed. In fact, I suspect criminal charges could be the result.

Let's take this out another step. Say you have $250K in an account for a grant. You think "Wow, I can speculate with that money, make a ton, and then return the $250K!!" I suggest this isn't all that much different to a prosecuting attorney from your original scenario.

UPDATE: FWIW, such costs are unallowable for NIH research grants: From https://grants.nih.gov/grants/policy/nihgps/html5/section_7/7.9_allowability_of_costs_activities.htm

Contingency Provisions
Unallowable. Payments made by the NIH awarding IC to the non-Federal entity's "contingency reserve" or any similar payment made for events the occurrence of which cannot be foretold with certainty as to the time or intensity, or with an assurance of their happening, are unallowable under non-construction grants. Contingency funds do not include pension funds, self-insurance funds, and normal accruals (also see Reserve Funds in this exhibit). (See also Construction Grants-Allowable and Unallowable Costs and Activities in IIB concerning contingency funds under construction grants).

Indemnification, though, is permitted under some circumstances, which I'm not sure would be met here.

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    Hedging is the opposite of a speculative "bet"; see user2705196's comment under the question. My understanding is that with hedging to cover the risk of the exchange returning to the old value, in the worst case they could still spend more GBP than if they'd effectively converted all the grant money at the start (at the worse exchange rate). If the exchange rate goes back up, their hedge "wins" and provides the extra GBP. If not, then it loses but the favourable exchange rate means they still have enough GBP to cover it + salaries. Sep 27, 2022 at 19:44
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    What if it was "Yeah, I know you gave us £200,000 worth of USD, but we didn't exchange it straight away and it was only £100,000 by the time we exchanged it"?
    – user253751
    Sep 27, 2022 at 21:25
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    @ScottSeidman: Currency hedging is not an "investment attempt". Typically one purchases a contract that basically says "Bank X agrees to change up to N dollars into pounds at rate R% at any time over the next Y years". While one should definitely clear the purchase of such a contract with both the institution and the funder before entering into it, it is in many cases prudent step, in much the same way as having insurance, and hence the institution and funder may consider it a good idea.
    – psmears
    Sep 28, 2022 at 9:59
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    @BenVoigt: Right, that's why I said you'd have to clear it with the funder & institution. (And if the funder's not happy but the institution is, then using other funds available to the institution would indeed be a solution.)
    – psmears
    Sep 28, 2022 at 21:11
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    @BenVoigt "Forex trading" is also probably not one of the permitted uses of grant money, and yet you're allowed to exchange it for your own currency...
    – user253751
    Sep 28, 2022 at 21:31

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