ING Group has partnered with Tradeteq to distribute its commodity trade finance exposures to non-bank institutional investors. Tradeteq operates an electronic trading platform, which allows banks to package their exposures into standardised, investable notes for non-bank institutional investors.
Federated Hermes (formerly Federated Investors) is a global investment manager with US$575.9bn in assets under management as of December 31, 2019. Federated Hermes was an early investor in trade finance assets; its role as a counterparty in the trade highlights its intention to diversify its portfolio and generate yield on behalf of clients.
Trade finance has a lower risk profile compared to other financial markets. It is based on tangible flows of goods and services, making it less susceptible to bouts of volatility, while default rates for trade finance products are lower. This presents a compelling investment opportunity for institutional investors seeking stable, long-terms yields. The Tradeteq platform now makes this asset class accessible to institutional investors.
ING joins several other bank and non-bank institutions that have joined Tradeteq’s platform and begun trading in recent and coming months. It offers an end-to-end solution covering three essential components: portfolio management and trading automation; risk analytics that provide greater transparency; and securitisation-as-a-service. These components ensure trade finance assets receive accurate risk scores, allow investors to access and transact these instruments in an efficient and standardised form.
“This transaction shows how Tradeteq’s electronic platform facilitates the distribution of an asset class with short duration in an efficient manner, something not possible until now,” said Anthony Van Vliet, global head of trade and commodity finance at ING. “The distribution of trade finance assets is a natural evolution of the trade finance market and Tradeteq’s technology is instrumental in helping us achieve this.”
“In line with its long history of innovation in the asset management industry, Federated Hermes is excited about this novel approach to introducing part of the trade finance asset class to financial investors and looks forward to using it as an important tool in its broader trade finance offerings,” commented Chris McGinley, head of Trade Finance at Federated Hermes.
“ING and Federated Hermes’ use of Tradeteq provides a clear example of how the trade finance market is being transformed,” said Christoph Gugelmann, CEO of Tradeteq. “Tradeteq is opening up the trade finance market to institutional investors and offering access to an alternative asset class with high levels of transparency and yield opportunities. At the same time, the platform enables banks to reduce their risk exposures and tackle the US$1.5 trillion trade finance gap. Any new marketplace needs both originators and investors; as this transaction shows, Tradeteq is attracting both market makers and market takers to the platform.”
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