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Enhancing Fixed-Income Portfolios With Trade Finance

  • Writer: PrimeAlpha Thought Leadership
    PrimeAlpha Thought Leadership
  • Nov 11, 2020
  • 2 min read

Updated: Mar 18

Enhancing Fixed-Income Portfolios With Trade Finance


What Is Trade Finance? A Dedicated Fixed Income Sector


In today's economic environment of high valuations and low bond yields, investors are turning to alternative yielding assets like trade finance as a substitute for traditional fixed-income securities. This sector, characterized by short-term financings, collateralization, and credit insurance, provides a safer alternative to traditional bonds and other private credit strategies, enabling investors to secure meaningful income without taking on excessive risk.


Trade finance reduces risk by funding mid to lower-market companies and transferring the ultimate credit risk to highly-rated insurance companies, allowing investors to achieve higher returns compared to similar corporate bonds. With banks reducing their involvement due to regulatory constraints, opportunities have grown for non-bank financial institutions and investors, enhancing the appeal and accessibility of trade finance as a fixed-income alternative.


Offering high yields, robust security through asset collateralization, and short investment tenors that produce frequent cash flows, trade finance stands out in the financial landscape. Its low correlation with broader markets and low default rates make it an attractive option for investors looking to diversify their portfolios and secure stable, consistent yields in a challenging market environment.


Access the full article to delve deeper into the advantages of trade finance as a viable alternative to traditional fixed-income investments. Discover how you can leverage this sector to achieve higher yields, robust security, and frequent cash flows while minimizing risk in your investment portfolio. Explore how trade finance can enhance your financial strategy in today's volatile market environment.



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Table of Contents

  • What is Trade Finance? A Dedicated Fixed Income Sector

  • Traditional Fixed Income Faces Increased Challenges and Headwinds

  • Why Trade Finance vs Traditional Fixed Income Offerings?

  • How Does Trade Finance Generate Best-In-Class Risk-Adjusted Returns?




Thanks to our Contributor


Highmore


Highmore is a global alternative asset management firm, investing in both public and private markets, directly and indirectly, across asset classes and investment structures.

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