A research report – Private Credit and the Trade Finance Opportunity – from TXF Intelligence highlights the increasingly important role of private credit funds in the trade finance market.  Attracted by an estimated global trade finance gap of $2 trillion, private credit investors are playing a key role in supporting cross-border trade.

The report, produced in partnership with the Alternative Credit Council (ACC), an affiliate of the Alternative Investment Management Association, and Simmons & Simmons, provides an overview of the trends shaping the involvement of private credit in the trade and commodities finance market. Sponsors of the report also include Drumlin Capital Management, Horizon Capital Asset Management, Inoks Capital, Qbera Capital and TradeFlow Capital Management.

The research provides investors with data and insight on the risk and return opportunities in this market. Key findings of the report reveal that:

• Corporates value the faster execution times, bespoke financing structures and strong relationships that they have developed with private credit managers
• The private credit sector is evolving rapidly through the incorporation of technology, ESG and more sophisticated risk management practices
• Greater awareness among corporates is needed to help private credit fulfil its potential in the commodity trade finance market
• Many banks value the partnerships that they have developed with private credit managers
• Alternative asset managers, banks and corporates are cautiously optimistic about the growth of the trade finance sector

Commenting on the publication of the report, Jonathan Bell, Editor-in-chief and Director at TXF, says: “This report is a unique piece of research which should prove invaluable in understanding the increasing role of private credit in trade and commodity finance.

“While the trade gap has got bigger over the past two years, largely because commercial banks have retrenched significantly from trade and commodity finance, the more nimble and flexible asset managers and funds are well-positioned to take further advantage of these opportunities. Interestingly though, the report also highlights that a collaborative approach between asset managers and banks could be one of the most successful routes forward.”

Jiri Krol, Global Head of the ACC, comments: “Trade finance offers a significant opportunity for investors seeking assets that offer a differentiated and competitive risk-adjusted return. It can also provide borrowers with the tailored and flexible finance solutions they need to thrive and innovate.  For these reasons we expect private credit to become a larger part of the trade finance market, and for trade finance to be soon recognised as its own distinct subset of the burgeoning private credit universe.”

Jolyon Ellwood-Russell, Partner at Simmons & Simmons, adds: “Our report shows the economic appeal of trade finance to private credit investors is increasingly attractive as an opportunity. Even so, the structures and solutions in trade finance and understanding the underlying flow of goods, money and documents can be complicated. Additional operational, logistical and documentary risks exist associated with the international trade and supply chain and these can be unfamiliar to private credit asset managers and their investors. However, the report demonstrates the determination and resolve of asset managers, investors and all participants in both the private credit and trade finance market to collaborate and continue to transform the trade and supply chain finance markets into an investible transparent asset class.”

Notes for editors

The research involved a quantitative survey of banks, corporates and private wealth managers/asset owners active within trade and commodity finance. The findings from this survey were then explored through qualitative interviews with survey respondents and asset managers.

TXF Intelligence - TXF Intelligence is the research arm of TXF Ltd; a London-headquartered news, data, research and events company specialising in trade, commodity, export (ECA-backed) and project finance. www.txfnews.com   Since its inception it has built a unique and world-class data site of commodity, export and project finance deal data at Tagmydeals. www.tagmydeals.com  It has also developed a project finance arm, www.proximoinfra.com and recently a DFI/MFI arm – Uxolo Development Finance. www.uxologlobal.com In addition, TXF has built its own virtual events platform – Kujenga Technology Solutions, which is also used by many third parties to hold virtual events. https://kujenga.tech/ 

Alternative Credit Council (ACC) - The Alternative Credit Council is a global body that represents asset management firms in the private credit and direct lending space. It currently represents over 200 members that manage over $450 billion of private credit assets. The ACC is an affiliate of AIMA and is governed by its own board which ultimately reports to the AIMA Council. www.acc.aima.org

Alternative Investment Management Association (AIMA) – The Alternative Investment Management Association is the global representative of the alternative investment industry, with around 2,000 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than US$2 trillion in hedge fund and private credit assets. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. www.aima.org/about

Simmons & Simmons  - Simmons & Simmons is a leading international law firm, offering access to more than 1,000 legal staff key business and financial centres across Europe, the Middle East and Asia. Recognised for both technical excellence and outstanding commerciality, our market leading finance practice advises, financial institutions, private credit fund managers hedge fund managers, real estate funds and investment fund managers in connection with a wide range of financings involving many different fund asset classes.

As both the asset management/investment funds and financial Institutions sectors are key areas of focus for our firm, whether we are acting for a lender, borrower or any party or service provider in the fund structure, we are able to deliver an efficient and high calibre service.

Our international trade & commodity finance practice consist of experienced specialist lawyers from a multi-disciplined base who advise on the whole range of trade & commodity finance products. We have extensive experience of transactions involving all major commodities and traded goods and understand the infrastructure that is in place to store, process and transport them. www.simmons-simmons.com