With interest rates rising globally, traditional investment options have become increasingly uncertain. It is now more critical than ever for investors to diversify their portfolios and safe-harbour their investments. Credit-insured factoring and trade finance is an often-overlooked asset class that provides an attractive yield, low risk, and stability in the face of rapidly changing market conditions.
Trade Finance is an excellent investment to combat rising interest rates for five reasons:
1. High yields, low risk: With rising interest rates and volatile markets, investors return to fixed-income and increasingly private debt assets for stability. A short-term tenor, credit-insured or secured by the underlying goods being traded, factoring and trade finance offers an attractive and safe alternative to traditional markets. Unlike other fixed-income assets, the margins or yields in trade finance transactions are agreed upon at the transaction time and hence do not fluctuate with market conditions. This makes trade finance returns a stable and predictable investment option.
2. Low correlation with other asset classes: A critical advantage of trade finance is its low correlation with other asset classes like stocks or bonds, providing diversification to any investment portfolio. Adding trade finance to a portfolio mitigates risk exposure while stabilising, if not enhancing, returns.
3. Participation in essential global trade growth: Factoring and trade finance are critical for international trade. By investing in trade finance, investors participate in the development of the global economy and benefit from the increasing demand for trade financing.
4. Opportunity for international investment: Trade finance is not limited to a single country or region, making it an ideal investment option for international investors. Whether focused on Europe, Asia, or the Americas, credit-insured trade finance and factoring provide a unique opportunity to selectively diversify your portfolio and gain exposure to a wide range of global trade transactions.
5. Trade finance performance during economic downturns: Trade finance has a proven track record of performing well during economic downturns. Trade finance remained resilient during the 2008 financial crisis while other asset classes suffered. Trade finance was one of the few asset classes that continued to provide stable returns during the crisis. Similarly, during the Covid-19 pandemic, trade finance emerged as a sound investment option, maintaining low default rates and attractive yields.
In short:
Whether you are a domestic or international investor, trade finance provides the rare opportunity to invest in the global economy while mitigating risk and achieving attractive yields – all backed by credit insurance.
Further reading
For further reading, the book 'TRADE WORKS' can be recommended. Unlike traditional finance books, 'Trade Works' is an accessible, witty, and insightful compendium on trade finance. Written by Wall Street Journal best-selling author Andreas Schweitzer, the book provides experienced investors and newcomers a unique opportunity to explore the untapped potential of the highly lucrative trade financing market.
Chat with the book
Experience a new way to explore Andreas Schweitzer’s book. Access the insights and research within ‘Trade works: The trade finance investor’ immediately, with an AI powered book bot. Simply ask a question and the book bot will provide the answer. Give it a try.
Artis Trade Invest
Artis Trade Invest offers privileged access to credit-insured SME trade finance assets. This underrated, secure asset class generates stable returns with low volatility. The fund is advised by Andreas Schweitzer, MD of Arjan Capital Ltd. Schweitzer's personal track record produced yields in excess of 10% p.a..
Investment strategy: Insured Trade Finance/Factoring Investment
Contact: Andreas Schweitzer
Email: as@artistradeinvest.com
Phone: +44 207 323 64 26
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