Ninepoint Partners is the latest alternative asset manager to dip its toe into the trade finance market, launching a fund that will assist US and Canadian SMEs with their funding needs.
The fund will give high-net-worth investors and their advisors the opportunity to invest in purchase order financing, supply chain financing and factoring to exporters.
The Ontario-based firm has created the fund in partnership with asset management firm Highmore Group Advisors in New York, which is acting in an advisory role. According to Ninepoint Partners, the fund has a target capacity of US$500mn and financing terms will range from 30 to 120 days.
Ramesh Kashyap, who leads the Ninepoints alternative income group, tells GTR that the fund aims to complement banks’ offerings and will primarily target businesses that are currently unable to get traditional financing.
Kashyap adds that the scope of the fund will expand into new regions as opportunities present themselves.
Explaining the decision to launch the fund, the asset managers cite a 2018 International Chamber of Commerce report, which shows that world trade flow is expected to reach US$19tn by 2020.
Much of this growth is driven by SMEs, which are often capital constrained because banks are unwilling to lend to them. This, the firms say in a statement, creates “significant opportunities for non-bank commercial finance companies”.
Many of the world’s biggest banks openly acknowledge the large, underserviced market of SME exporters. However, banks are also grappling with high onboarding costs compared to the revenue opportunities of relatively small-scale loans, along with the cost of compliance with post-crisis regulation such as Basel III, know your customer and anti-money laundering requirements.
The small but growing trend of SMEs looking elsewhere for financing was exemplified in a poll by Growth Street released last week. The survey of more than 2,000 directors and employees of British SMEs conducted in January, found that just under half would go somewhere other than a bank when seeking a business finance provider.
Banks are not taking this trend lying down, however, and some are re-emphasising their support of SMEs with new funds of their own.
Barclays, for one, announced in March it was setting aside £14.7bn in the form of a new lending fund to help UK SMEs during a period of business uncertainty surrounding Brexit.
“In terms of helping SMEs, we’ve made it easier than ever to borrow by providing pre-assessed lending limits to clients within their mobile app. Also, last year we lent £2.8bn to UK SMEs, which was up 3% on the year before,” a spokesperson for Barclays tells GTR.
Ninepoint Partners joins the likes of SME lending platform Validus Capital and asset manager Lighthouse Canton in Singapore, which recently reopened a trade finance fund with double the capacity, worth an additional US$14.8mn.
Validus cites the fact that eight in 10 SMEs in Singapore do not qualify for traditional financing, resulting in almost US$20bn of unmet financing needs.
Alongside growing interest from fund managers, exporters are also seeing new financing opportunities arise from the emergence of digital peer-to-peer (P2P) lending platforms that offer smaller investors access to strategies that were previously reserved for institutions and banks.
In February, Beehive Global Group, a digital P2P platform based in UAE, expanded its remit with the launch of Beehive Asia in Thailand in partnership with Thanachart Bank.