Summary: In the current market, a number of Institutional Investors & Asset Managers have surplus cash/ liquidity especially on shorter-end of the curve with limited number of investment grade assets available in the market. Thus, a portion of this short-term liquidity is in bank deposits and treasuries giving sub-Libor returns. Institutional Investors & Asset Managers are exploring opportunities to improve short-term yield and reduce cash-drag.
Some salient features of their requirements:
(a) Size: Ability to undertake large ticket transaction for individual Obligor
(b) Scalability: Issuances from different types of obligors
(c) Diversity: Investors can customise the portfolio as per their requirements
(d) Ability to identify individual assets and price the risk accordingly
(e) Structured for sale like Syndicated Loans/ Bonds/ CPs/ CDs
(f) Standardisation: All investment structures should be in a standardised legal structure from Institutional Investors perspective
(g) Institutional Investors are looking at investment decisions with minimal incremental operation burden/ heavy lifting
(h) Lastly, options for managing their portfolio with hedging tools like CDS, private insurance, etc. post buying these trade finance assets.
Pinnacle Trade Finance can help Institutional Investors various ways and feels that Top-5 areas to focus are follows:
1. Feasibility study
2. Sourcing of trade assets – different products, diversity of obligors and scalability
3. Legal structures including transferability
4. Technology solutions/ providers
5. Market Maker role