Hedge funds in the US, UK and Singapore have signed agreements with the trade receivable sale/auction platform Aztec Exchange (Aztec), to purchase invoices from suppliers in emerging markets and credit-constrained developed markets.
Through the agreement, these funds will buy the receivables from a variety of regions with short-term maturities (45-90 days), with average annualised yields around 20%.
“Trade receivables are a unique investment proposition for fund managers as they can offer superior yields over other short-maturity assets,” said Aztec Exchange chief executive (CEO), Edwin Hagan-Emmin. “More importantly, our platform facilitates a ‘true sale’ of the invoices, which means the credit exposure is not with the supplier in the emerging market but with their debtor, often a multinational corporation of verifiable credit standing.
“We are in talks with additional investors as we push ahead with large trade receivable programs, and expect our client base to continue to grow in the coming months.”
The deals follow the first six months of operations for Aztec, which said that it has registered over 200 suppliers to sell invoices on its platform since going live in June 2013 and has capacity for US$30bn of trade receivables annually. The company added that it plans to open offices in the US and Asia within the next six months, to accommodate further growth.
It is engaged with a handful of global corporations to help their suppliers access working capital as part of supply chain financing programmes. Aztec is also in early-stage conversations with banks about developing a trade receivable funding and referral program, where these institutions can route clients’ invoices to the Aztec platform.
“Major corporations are embracing Aztec as a supplement to traditional bank capital in supply-chain finance,” said Hagan-Emmin. “With banks tightening their lending to small businesses, especially in emerging and credit-constrained markets, corporates are increasingly looking to innovative, alternative solutions to support their suppliers.”
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