Tradeflow Capital is a member of the Alternative Investment Management Association (AIMA) and a corporate member of the Singapore FinTech Association (SFA).
TradeFlow transforms the risk associated with SME company import/export Commodity transactions that form the lifeblood of modern economies in to Investment Grade products for Banks and Investors. It achieves this by using a proprietary Risk Transformation Engine (RTE) combined with the latest Digitalisation technology including Artificial Intelligence to power its innovative non-credit, non-lending model. TradeFlow’s RTE architecture provides the added advantage of superior risk-adjusted returns and capital preservation for investors and is highly complementary to traditional trade finance lending institutions like Banks.
In 2016 the founding team with a diversified background spanning commodity trading, shipping, technology and law came together to research into and develop a solution for the growing trade finance gap faced by global SME firms operating as producers/traders/end users in the bulk commodity import/export space. Their research found that the growing trade finance gap for SME firms in this arena was driven by several key factors including changing banking regulations, the burden of increased KYC/AML costs and requirements and the general issue that most SME firms faced was despite having the proven expertise in their management and operations team they did not have a track record of more than three years, or their balance sheet was not big enough, or transaction size per import/export trade was too small for any bank to support. The solution to this ecosystem problem was a simple one, i.e. find a way to enable the transaction for an SME firm without giving credit or finance. The unique solution are the TradeFlow Funds, (1) CEMP – USD Trade Flow Fund SP (Live from May 2018) and (2) the CEMP – EURO Trade Flow Fund SP (Launched February 2020) which take a neutral principal position and direct ownership of the commodities during shipment or during a pre-agreed storage period. The USD Fund launched in April 2018 after two years of research and development work on the business model, a digitised technology platform to allow the Fund strategy to be scalable and the legal framework master agreements to connect everything together.
The primary challenge we heard from investors even at the start of the development of our business solution and fund offering back in early 2016 was that investors like Trade Finance, but are unable to get enough of it. We believe that scalability of trade finance strategies has been the biggest challenge for the hedge fund industry. As a result we focused on digitising our whole business and transaction process in order to have the potential to be scalable in to a billion dollar fund handling small SME transactions. We created joint ventures with technology providers and own some of our own technology and had to look at being a FinTech fund manager.
The Fund offers investors a globally unique non-credit approach to access the low risk, low default, and diversified returns available from the trade finance asset class. This is the first key difference an investor recognises when comparing us with other Funds. The other key thing is our Digital Platform which enables quick and low cost on-boarding of the counterparts our fund executes transactions with (typically within 3 days with full bank level AML/KYC checks).
As the Fund does not lend money nor give credit it offer a truly asset backed strategy and one which does not compete with banks and traditional trade finance lending sources. As a result, banks work with the Fund and introduce SME clients who they are unable to effectively support; usually due to the fact their transaction sizes are too small and their annual turnover below US$300 million dollars.
Another winning edge is the Fund’s developed bespoke scorecards in cooperation with Lloyds of London underwriters for scoring Counterpart Risk, and a world’s first unique scorecard approach to rate the risk level on each and every individual transaction it invests in.
Another attraction for investors is the liquidity of the fund. It offers 90 day liquidity to investors and as a result the Fund is often referred to as a fixed income alternative and even used as a cash management tool.
