By André Casterman, Founder and Managing Director, Casterman Advisory and Chair of Fintech Committee, ITFA

Data sharing, digitisation, and harmonisation of SME credit insurance practices are key ingredients to attract more funding to the trade asset class. These were the conclusions shared by the representatives of Trafaltin, NN Investment Partners and Channel Capital Advisors during our recent investor-centric TFD Initiative webinar. The talk demonstrated that institutional investors are committed to the trade investment class and are seeking to build new long-term partnerships with trade banks.

The banking industry has demonstrated since about a decade that trade is an attractive asset class for institutional investors, and it seems it was heard loud and clear.

In October, we focused on the growing importance of credit insurance and institutional funding to banks’ revenue business model. In November, we expanded on how TFD Initiative is enabling banks to engage with institutional investors through new multi-bank market practices to make trade assets accessible to such non-bank liquidity providers.

During the session of December, I invited three representatives of the investor space to debate their views and expectations of the on-going market transformation:

Part 1 – Rationale: is trade finance becoming an attractive asset class for institutional investors?

“For insurance asset management companies, trade finance offers an interesting return on capital in addition to being a diversified and scalable investment class.”, Suresh Hegde, NN Investment Partners

The panel agreed that more investors will engage with more banks in the future. Both sides are seeking for certainty in the new bank-investor relationships. Investors will want to partner with multiple originators which will contribute to supply risk mitigation and investment diversification. Long-term partnerships are therefore expected to be sealed between banks and institutional investors.

Part 2 – Expectations: which priorities stand out on the asset management side?

“Bank and insurance regulators need to align as requirements on trade originators should be recognised on the insurance side.”, Stef Merckx, Trafaltin

Part 3 – Growth: how can distribution flows scale?

“ESG is a top priority for institutional investors which is why a new dedicated function was recently created and reporting straight to me as CEO.”, Walter Gontarek, Channel Capital Advisors

Part 4 – Calls to action

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