Trade finance is the oldest form of financing and is vital to the global economy. It
facilitates business to business trade in goods and services between exporters and importers.
Global banks are best in class in providing trade finance due to the depth and the breath of their global footprint. For credit investors, investing in trade finance and trade receivables could represent:
A source of alpha with very low correlation to public fixed income and credit markets;
Returns determined by a floating rate benchmark (i.e. libor) plus a credit margin;
Short duration returns due to very short tenors (30 - 360 days);
Short duration returns due to floating rate pricing;
A very scalable investment opportunity;
A means to obtain returns from a diversified portfolio;
A means to make a responsible credit investment that complies with stringent ESG criteria.
The low credit-loss characteristics of Trade Finance are illustrated by the ICC
Trade Register. This database contains historic Trade Finance credit performance data from 25
banks, more than 20 million transactions and more than 11 USD trillion exposure.
To download the ICC Trade Register click here.