EFA Group, the Singapore-based fund formerly known as Eurofin Asia, has launched a US$50mn fund for asset-backed lending to SMEs.

The fund says that it has already secured 100% commitment from investors and has a “ready pipeline of deals that it will underwrite over the first half of the year”. The first loans are to be disbursed next week, GTR understands, and the intention is to grow the size of the fund to US$150mn by mid-2017.

The deals will range from US$2mn to US$20mn and will have an average tenor of three years. Asked to describe a typical transaction the fund would cater for, an EFA spokesperson said in an email exchange: “Sample transactions include a cocoa trader that needs financing to acquire another crushing plant, an established tin miner that wants to purchase an additional tin mining dredger, or a hire purchase for a water recycling plant from a manufacturer of rubber products.”

The fund is already operational in the trade and commodity finance space in Asia, out of its Singapore office and it expects the ‘Real Economy Income Trust’ to operate in the same manner as its existing products: offering senior, secured loans, backed by collateral such as assets financed, pledge of shares, corporate guarantees and personal guarantees.

The spokesperson says the company is “agnostic” about the sectors to which it will deal with, but that it will stick to “real economy companies” – hence the fund’s title. The funds will be available to SMEs in Asia and the Emea region.

The fund’s portfolio manager is Xavier de Nazelle, and he says that its inception is a result of bank’s continuing efforts to shrink their balance sheets.

He explains: “Companies in the SME segment are most impacted with fewer new deals being financed. All of these companies are banked, but an increasing number of their mid-term financing needs tend to fall below banks’ radars. We enjoy a close relationship with the banks, and work together to best service our borrowers.”

The presence of funds in trade and commodity financing has been a hot topic for a number of years now. EFA’s expansion into asset-backed lending arguably represents an evolution of a trend which has existed for some time.