Trade finance remains one of the most elusive asset classes for investors. On the surface, for an investor, the characteristics are perfect: trade finance pays a higher yield than conventional fixed income, it has a shorter duration and it is secured. However, there are risks associated with the sector, mainly fraud and documentary failure. Addressing these risks has limited the ways investors can access the market to purchasing a fund and partaking in a Risk Participation Agreement.
Key learning objectives:
Explain the key risks associated with the trade finance sector
Understand the ways of accessing trade finance and each structure’s limitations
Compare and contrast the fund structure and risk participation structure