Opalesque Industry Update: Scipion Capital (“Scipion”), the Africa investment specialist, has opened its Commodity Trade Finance (CTF) Fund to US investors for the first time, as the first step in a concerted effort to expand its investor base in the US. In particular, the firm will be targeting US investors looking for absolute returns and real alpha.|
The CTF Fund has achieved 55 months of consecutive positive performance since it was launched in August 2007. The fund provides loans directly to companies and financial institutions trading in soft commodities in African markets, and makes its returns through reimbursement of the loan upon the completion of each deal. Conscious of food price volatility created by speculators and gamblers in commodities prices, Scipion only lends to those with long inventory and a genuine involvement in the supply chain, and never takes positions in commodities themselves.
To successfully operate across the whole African continent, Scipion’s investment team has developed a thorough quantitative and qualitative risk analysis, which is carried out before the on the ground due diligence performed ahead of each new deal. It is the firm’s approach to risk, combined with the historically low risk of default in this global asset class, which has produced the 100% track record of positive monthly net returns. Scipion adds genuine Alpha through its risk mitigation management process, and experience with managing logistics in remote regions of Africa.
As a result of the growing popularity of commodities-related and alpha-generating strategies in the US, Scipion has launched a marketing campaign directly targeting American investor bases. The firm expect the fund’s innovative Absolute Return strategy to appeal to US investors, particularly at a time of significant volatility in commodity markets.
Spearheading the marketing campaign is Head of Business Development Chris Jenkins, who prior to Scipion, worked as Managing Director of EMEA Equity Finance at Bear Stearns, part of the successful Prime Brokerage division that was bought up by JPMorgan in 2008. This builds on the existing US experience of Founder and CIO Nicolas Clavel, lead manager of the CTF fund, who managed trade finance for a range of Europe, Middle East and African markets for Citicorp in London and New York
Nicolas Clavel commented:
“Our previous experience within large US institutions stands Scipion in good stead for the next stage of the fund’s expansion. We made a deliberate decision to wait until Scipion and the CTF fund were in a position to attract and cope with demand from the US. With such a large investor market, the timing of when to enter the US is key. The make-up of the firm and track record of the fund have convinced us that that time is now.”
The CTF fund has proved its ability to make returns in rising or falling markets. Since the fund was launched in August 2007, amidst the global Credit Crisis, it has weathered extremely volatile global markets and political events thanks to focussing its strategy on staple commodities such as coffee or salt, in which demand is largely unaffected by macroeconomic factors.
Scipion believes that the proven track record of their CTF strategy is a prime example of what an Absolute Return fund should embody. Total returns for the CTF fund since inception stand at over 68%, a net average annualized return of 12%, showing remarkable consistency of returns.
“We believe that the performance of CTF fund is how a true Absolute Return strategy should perform. Despite turmoil in markets around the world in the last four years, thanks to our risk mitigation techniques and philosophy of investing in tangible commodities the fund has never failed to make a positive monthly return. The US investor market is quicker than most to capitalise on opportunities to add alpha to their portfolios when they can. We therefore believe the fund will prove popular with the US market.”
“Investing in the CTF fund is a prime opportunity for US investors to take advantage of a rapidly expanding and developing commodities supply chain from Africa to the US. In a continent that is progressing as fast as this one, this is the time for global investors to take advantage of its continuing growth.”
Thanks to the ongoing Sovereign Debt Crisis and Basel 3 regulations that increase the capital banks must hold against Trade Finance loans, an ever greater number of commodities supply chain companies are reaching out to specialist funds such as Scipion as a source of finance. The huge increase in demand for trade finance created by the vacuum left by European Banks cutting their exposure to this space has led Scipion to broaden its investor audience, and they believe that they now have the capacity to meet the demand from the US. As part of the marketing campaign, Scipion has also made its other investment strategies available to the US market. This includes its index tracker fund, Scipion Ai40 Index Tracker Fund, the first ever pan-African investible index, launched in 2007.
The fund has a minimum investment of US$500,000 and targets traditional hedge fund investors such as fund of funds, HNWIs, family offices and institutional investors. It typically provides financing for a range of commodities assets, from soft commodities such as cocoa, salt, tea and coffee to minerals from mining, such as tin and copper.