Euromoney, is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
TREASURY

Trade finance is an asset class for private credit funds

Coupled with technology advances, positive ESG considerations could unleash the potential of private credit to reduce the global trade finance gap.

coin-g8cab14ee0_960.jpg

The International Trade and Forfaiting Association (ITFA) has acknowledged that banks alone will be unable to fully address global demand for trade financing and that there is a need to advance the evolution of trade finance as an asset class for alternative investors such as asset managers, insurance companies and pension funds.

A report published by the Alternative Credit Council (ACC) and international law firm Simmons & Simmons at the end of last year – Private credit and the trade finance opportunity – claimed that private credit investors were already playing a key role in supporting cross-border trade and that corporates value the faster execution times and bespoke financing structures developed with private credit managers.

Thibault Sandret_960.jpg
Thibault Sandret, bfinance

At first glance, trade finance is a no-brainer for private credit. It is a multi-trillion dollar asset class based on the flow of physical goods and services, making it less susceptible to financial market volatility. Default rates are generally lower and the time to recovery in case of default tends to be shorter than for other credit products.

However,