Trade Finance

Potential to access uncorrelated alpha with limited reliance on traditional return drivers.

Overview

Trade finance is basically a sub-set of the loan market. It is relatively short-term loans used to finance the physical flow of goods, using those goods as the primary source of collateral within the loan.

Christopher McGinley
Senior Vice President, Head of Trade Finance

Why Trade Finance?

Trade finance can potentially provide an opportunity for investors to access uncorrelated alpha with limited reliance on traditional return drivers.

Short-term loans to facilitate physical cross-border transactions can reconcile the divergent needs of an exporter and importer.

Trade finance has a critical role to play in addressing snags in global supply chains and ensuring that vital commodities continue to flow.

Investment philosophy

Federated Hermes’ Trade Finance Strategy offers investors the potential for a source of uncorrelated return, with low volatility and high return that adjusts with inflation. Trade Finance is an asset class that requires specialised experience including intensive legal and operational due diligence, a deep understanding of risk and how to mitigate it, and relationships with the largest global banks. We believe that as the worldwide demand for trade continues to grow, a diversified pool of trade transactions will consistently deliver the ‘pure alpha’ that investors seek.

Investment process

Trade Finance refers to loans that are made to finance a specific trade transaction. The loans are collateralised by the goods being financed and are self-amortising from the proceeds of the transaction. The loan rates float at a spread over a short duration index, allowing for adjustment to inflation and the lenders build risk mitigants into the deals to reduce the chance of loss.

Highly selective
Sourcing
Screening
Detailed due diligence

Team

4629, 9103, 9104, 10147

Kazaur Rahman

Portfolio Manager, Senior Investment Analyst

Maarten Offeringa

Portfolio Manager, Senior Investment Analyst

Chris McGinley

Head of Trade Finance Team, Senior Portfolio Manager

Ihab Salib

Ihab Salib

Senior Portfolio Manager, Head of International Fixed Income Group, Federated Hermes

Badge big

Product information

For the latest performance and vital information – including prices, factsheets, key facts, identifiers and ratings

BD014653