Latest
News.

White Papers: Manager Views

-

Untitled-1

 

 

 

Mark Wright
COO, Kimura Capital LLP

 

 

Traditional bank finance continues to be constrained and, in many cases, unavailable for small and medium-sized enterprises due to regulatory changes. This has resulted in a substantial structural funding gap for non-bank lenders to fill. Moreover, data from the Asian Development Bank suggests the current USD 1.5 trillion global trade finance shortage is expected to increase over the next two years.

As the credit lines of large global banks remain curbed, active investment opportunities continue to open up in select high quality trade finance transactions across regions and multiple strategic commodities (i.e. cocoa, copper, sugar, metals). There is a clear demand for funding throughout the supply chain spectrum from producer, processor / refiner to distributor / merchant trader.

Trade finance remains a market segment with high barriers to entry for non-specialised outside investors. We believe success depends on selecting self-originated, tailored, ring-fenced commodity trade finance lending while retaining full control over deal cash flows, assets and contracts.

Data from the International Chamber of Commerce (ICC) confirms trade finance default rates from 2008-2018 were low (0.02%) across all products and regions. Even so, we believe it is important to mitigate that risk further by only investing in commodities, regions, counterparties and transactions that satisfy very strict risk and credit parameters.

Importantly, for investors, returns from this asset class are independent and largely uncorrelated to wider public or private financial markets. This
offers access to a unique, differentiated income stream to an efficient investment portfolio, providing there is no heavily-weighted individual commodity or transaction risk.

The long-term sustainable returns of companies and the wider global economy are dependent on stable, functioning and well governed social,
economic and environmental systems. In this context, we are strong supporters of bringing responsible investment into the mainstream for
commodity trade finance and expect this to be a major industry theme going forward.

 

Past performance is not an indicator of future performance and current or future trends. The views are those of the manager and are subject to change. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. Allocations and holdings are subject to change. The views are those of the manager and are subject to change.