Trade finance continues to gain momentum as a securitised asset class with the launch of Allianz Global Investors’ (AllianzGI) second trade finance fund.
The Allianz Working Capital Investment Grade Fund (Alwoca IG) builds on the success of its predecessor, Allianz Working Capital Fund (Alwoca).
Introduced for professional clients three years ago, the original Alwoca structure sees trade finance assets including invoices, receivables backed loans, factoring, documentary credits, notes, bonds and other instruments sourced by partners including HSBC, put into a special purpose vehicle (SPV). These assets have different risk profiles and typically short tenors, such as 60-day fixed term corporate payables. AllianzGI then acts as portfolio manager for the SPV, selecting the transactions purchased. The SPV’s assets are then wrapped into notes that Alwoca will buy, enabling the fund to take exposure to trade assets through a securities format.
Since the fund was set up, AllianzGI has brought in €500mn from European institutional investors, and said in June this year that it had won additional mandates which can bring assets to €1bn.
With this new, investment-grade, iteration of the fund, the asset manager says it is targeting “investors who have restrictions on high yield rated investments but would like to enjoy the defensive nature of short-dated, diversified, trade finance investments”.
AllianzGI says it will source transactions through its existing network of sourcing partners, and aims to offer “attractive” yield, weekly subscriptions and redemptions and diversification benefits. The fund manager also says that its short interest rate duration allows resets to rising rates whilst its short spread duration and no reliance on capital markets seeks to help reduce volatility in case the credit cycle deteriorates.
“We are excited to launch this investment-grade version of the existing Alwoca fund,” says David Newman, AllianzGI’s head of global high yield. “We believe the characteristics it offers are particularly relevant to investors today in an environment of heightened geopolitical tensions, volatile bond yields and rising inflation. In this environment, trade finance can offer the flexibility and potential returns to help investors navigate the uncertain outlook.”
“We believe that Alwoca IG is a ‘cash plus’ alternative that seeks to stabilise portfolios in today’s world of elevated asset class correlations,” adds Martin Opfermann, lead portfolio manager.
This marks the latest development in what is becoming an increasingly noisy space, as investors and technology providers alike seek to capitalise on the attractive risk-adjusted returns with low correlation to stocks or bonds offered by trade finance as an asset class.
Earlier this year, Tradeteq, a technology provider for trade finance asset distribution, launched what it calls the first-ever marketplace for buy-side investors to participate in the secondary trading of trade finance assets, giving investment managers access to deal flows from selected bank and non-bank originators.
“Trade finance offers tangible benefits to investors looking for alternative assets – particularly in today’s volatile climate,” Nils Behling, co-founder and CFO at Tradeteq told GTR at the time. “It’s low-risk and offers yield pick-up and uncorrelated assets that pay above commercial risk spread.
Meanwhile, last year, trade finance marketplace LiquidX launched an automated digital distribution tool for trade finance assets, allowing banks and asset managers to initiate single-click trading with their investor networks under existing agreements, or to the LiquidX network of over 50 funders.