The trade finance story is not really about shipping containers, letters of credit or the mechanics of cross-border commerce. Investor capital can do something different here: finance the movement of real goods and loosen the grip of the return drivers that dominate most portfolios.
The timing couldn’t be more relevant. Investors are still demanding income, defensive diversification, and a clearer account of what their money is actually financing, and conversations may well begin with the scale of the problem itself.
The global trade finance gap was estimated at US$2.5tn in 2025, a steady increase from US$1.5tn in 20151.
At the same time, 80–90% of world trade is dependent on some form of financing2. The global economy still relies on credit to move goods from seller to buyer, but the supply of that credit has not kept up with demand.
Trade finance is hardly new. It is one of the oldest forms of credit, dating back to the 13th century, but it has only become readily accessible as an asset class in recent years.
At its simplest, trade finance refers to loans that provide short-term financing to support the physical flow of goods. Each facility directly addresses the risks that cross-border trade throws up, from currency movements and regulatory compliance to documentation risk and non-payment.
The real economy problem
The importance of the asset class is that it sits close to the real economy. The underlying goods collateralise these loans, which typically liquidate themselves as delivery completes and payments come in. The lender’s toolkit can include collateral management, control of title over the goods and ring-fenced cash flows.
For investors, this gives the asset class a tangibility that most credit lacks: repayment is tied to specific trade flows, not an abstract corporate balance sheet story.
Trade finance has remained resilient despite the series of shocks over the last few years, including the Covid-19 pandemic, supply chain disruption, rising inflation, higher rates, the Red Sea disruptions and shifting tariff regimes.
Global trade has continued to demonstrate resilience.
Global trade has continued to demonstrate resilience. Essential goods still need to move, even as the policy and geopolitical backdrop grows more complex. Trade volume has risen 6.3% since 2019 and 19.1% against the 2015 average3.
A further structural driver is the growth of South-to-South trade among developing countries. Analysis suggests this segment could rise from 17% of total global trade in 2010 to an estimated 40% by 20304.
The gap bites hardest in emerging markets, where constrained bank credit and thin working capital leave distributors dependent on external liquidity to finance the movement of essential goods.
The shortage of trade finance exists partly because the asset class is operationally intensive. The opportunity has been largely untapped by asset managers because of high operational costs, asset granularity and short instrument tenors.
This is an important caveat. It is not a generic yield product, it is a specialist credit exposure that depends heavily on sourcing, legal structuring, collateral oversight and risk management.
From funding gap to portfolio allocation
The investment case flows from that complexity. The potential benefits of trade finance are alpha potential, diversification, high income potential, low volatility, short duration and uncorrelated returns.
The default numbers are striking. Trade Finance Global recorded a 0.02% exposure-weighted loss given default rate on export lines of credit in 2023, and 0.10% on imports5. Transactions also carry low interest-rate and credit-duration risk, floating at a spread over a short-duration index such as SOFR6.
Trade finance opens up a vast and underfunded part of the global economy. But the allocation case should be built on evidence, not novelty. The strongest argument is that a US$2.5tn capital shortage exists in a market that facilitates most of world trade.
Likewise, the asset class has historically offered short duration, floating-rate income and low correlation to mainstream markets. All qualities that make this asset class well worth a closer look for clients that are seeking regular income from different drivers of yield.
A version of this article originally appeared in The Inside Adviser in June 2026
For information on Trade Finance
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1 ADB Global Trade Finance Gap Survey (ADB Brief 378)
2 World Trade Organisation
3 Global Trade Outlook and Statistics. World Trade Organization, April 2024.
4 South-South Trade and its Implications for the World
Economy. International Banker.
5 These figures are drawn from historical data and may not be representative of future outcomes or all trade finance strategies.
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