NN Investment Partners has launched the fund NN (L) Flex Trade Finance, offering institutional investors access to a conservative portfolio of short-dated trade finance loans which are sourced globally. The asset manager announced in a press release that they will partner with Channel Capital Advisors LLP to enhance sourcing and pipeline management of the strategy.
“Trade finance allows institutional investors to enter a USD 15 trillion market that has been dominated by banks until recently. In trade finance, investors can find a potent portfolio diversifier that offers a yield pickup over liquid credit and that is efficient from a solvency capital perspective”, they pointed out.
The asset class is short in tenor which, in NN IP’s view, provides natural liquidity and allows portfolio managers to react quickly to changing circumstances. The investment strategy focuses on well-rated loans that facilitate a specific sale of often essential goods, which are supported even under stressed market conditions.
“Strict investment guidelines ensure a highly diversified portfolio in terms of geography, sector and counterparties, without employing leverage”, they said. Also, portfolio construction is aimed at properly diversifying risk whilst still allowing for a robust analysis of each individual transaction on credit and environmental, social and governance (ESG) criteria.
In this sense, the firm will assess each transaction of the strategy on ESG criteria using a specific framework for trade finance and align each of these with the Sustainable Trade Criteria from the International Chamber of Commerce. In addition to this, they will apply proprietary policies with a focus on financing sustainable goods with positive social impact (encouraging responsible consumption) and restricting the financing of goods with negative impact (such as coal, crude oil and tobacco).
Suresh Hegde, Head of Structured Private Debt, commented that, in the current low-interest-rate environment, there is growing demand for trade finance amongst institutional investors. “Building on our 10-year track record in financing international exports, we have spent a considerable amount of time assessing the short-dated trade finance market. We are delighted to offer a strategy which allows institutional investors to benefit from the attractive characteristics of these assets in a robust and responsible manner, without adding undesirable idiosyncratic risk”, he added.
A sub-fund with monthly liquidity
The asset manager revealed that the NN (L) Flex Trade Finance has a medium-term target return of USD LIBOR + 3-4% gross with a weighted average credit rating of BBB-/BB+, and an average maturity of less than one year. It offers institutional investors quarterly interest income distribution and monthly liquidity.
The strategy is a sub-fund of NN (L) Flex, established in Luxembourg. NN (L) Flex is duly authorised by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. Selected share classes of the sub-fund are currently registered in Luxembourg, Netherlands, Germany, France, United Kingdom and Italy.
Por Funds Society, Madrid