The Cayman Emerging Manager Platform SPC — USD Trade Flow Fund SP launched in May 2018; the EUR Trade Flow Fund SP followed in February 2020. Both vehicles take a neutral principal position and direct ownership of the underlying physical commodity during shipment or pre-agreed storage.
A track record of consistent returns
The flagship USD fund has delivered consistent returns since inception, with average monthly returns above +50 bps and volatility below 0.8% over a multi-year window. An independent September 2018 study quantified the equivalent risk of loss at AA on the S&P scale.
The trade-finance gap
Trade finance underpins around 80% of global trade transactions. Yet the World Trade Organization reports that around 60% of trade-finance requests from small businesses are rejected by banks; the Asian Development Bank put the rejection rate at 74% as of 2017. Most rejections cite transaction size — typically below US$15 million — and the cost of running KYC and AML against the bank's regulatory capital.
The introduction of Basel II and III pushed major global banks further out of trade finance. Capital requirements rose; pricing competition compressed margins; banks rationalised exposure. Our research isolated a sub-sector of SMEs in bulk physical commodity materials hardest hit by this credit gap — an opportunity we put at roughly US$700 billion.
Two answers, applied together
We arrived at two answers to the trade-finance credit problem for this sector:
Reduce cost and processing time through digitisation.
Enable international trade by not lending money and not giving credit.
Two years of infrastructure and process development followed. The result is a strategy that gives investors all the diversification benefits of the trade-finance asset class plus further diversification away from pure private credit — and a business solution for the under-banked SME community in shipments and inventory warehousing globally.