US investment manager Federated Investors has launched a project and trade finance tender fund to broaden its investment activities in the field.

The firm has been investing in trade finance assets since 2006, but has now structured this activity under an interval fund construction, which makes it more accessible to various investors.

“What we found was that there were smaller institutions who couldn’t meet our investment requirements – initially set at US$25mn – but wanted access to trade finance in a product that was easily used in smaller slices. To that end, we investigated the idea of an interval fund, which is closed-end and quite broadly used by other illiquid assets that need a fund construction to make them usable by their investors. The minimum investment in this interval fund is US$500,000, and it has a quarterly liquidity with a maximum amount available each quarter. An investor who would like to withdraw money can put in a request and redeem at the end of the quarter,” Robert Kowit, senior vice-president, product specialist, at Federated Investors, tells GTR.

The company invests an average of US$300 to US$500mn a year in 80 to 100 trade finance transactions, mostly getting involved in the initial syndication of deals originated by major commercial banks, regional development banks or commodity houses in emerging markets. It expects this amount to grow under the new structure.

However, Kowit explains that investors are still largely unaware of trade finance assets, and that education needs to be improved.

He says: “There are virtually no clients, neither institutional, no matter how sophisticated, nor high-net-worth, with any knowledge of trade finance. Education is the absolutely critical missing component in making trade finance more interesting for financial investors. When you look at the size of the investible funds in the world, the fastest-growing sectors are in the high-net-worth and private banking departments of commercial banks, yet the private bankers know nothing about trade finance – it’s amazing.”