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Nabil Marc Abdul-Massih B. G., Opalesque Geneva: A Swiss manager that provides short-term private loans to corporates - especially in the food value chain sector - has maintained steady returns this year and expects to continue doing so.
The Ancile Fund provides short-term alternative credit to non-speculative corporates active responsibly in commodity value chains. The fund is non-directional and unleveraged and focuses on emerging markets.
Launched in November 2009, the Cayman B USD share class, which manages $285m, has returned +162% since inception and +3% YTD after returning +0.4% in June 2020, outperforming several indices YTD including the Rogers Commodity Index and the 3M Libor Index.
The fund is managed by INOKS Capital SA, a FINMA regulated Swiss-based manager that runs $603m in Cayman and Luxembourg investment funds as well as SMAs, and finances more than 150 corporates.
INOKS was one of the signatories to adopt the Operating Principles for Impact Management last year.
CEO Nabil Marc Abdul-Massih and COO Nicolas Malky have each more than 20 years of experience in commodity investments. Mr. Abdul-Massih will be speaking at the Fixed Income Alternatives Strategies webinar on Wednesday 9th September at 10 am EST.
Food value chain
The managers describe the strategy as a "food value chain fund" that provides tactical (short term and mid-term) collateralized (i.e. hard assets-based) farming, inventory, processing, and export/import financing.
The food value chain is the network of stakeholders
involved in growing, processing, and selling the food
that consumers eat-from farm to table This includes
(1) the producers that research, grow, and trade
food commodities, such as corn and cattle; (2) the
processors, both primary and value-added, that
process, manufacture, and market food products,
such as flour and bread; (3) the distributors, including
wholesalers and retailers, that market and sell food;
(4) the consumers that shop, purchase, and consume
food; as well as (5) governments, non-governmental
organizations (NGOs), and regulators that monitor and
regulate the entire food value chain from producer to
consumer (Deloitte).
The Ancile Fund's current portfolio transactions are about 90% food-related. "This is a historical focus for INOKS Capital's investment management (with varying degrees), and such by design," says their latest newsletter seen by Opalesque. "Basic foods and related products tend to have a more inelastic demand curve. People need to eat for subsistence and that incompressible level of demand configuration for non-perishable food basics (like wheat or rice or vegoils or sugar or other soft commodities) has been researched to insulate, as much as possible, the portfolio from general macro-economic hypothetical tail type turmoil."
The investment risks, the managers say, can be found in loss of capital and liquidity. They are mitigated by the lack of leverage, insurance overlays, and over-collateralisation.
The benefits can be found in possible income distribution, low correlation to traditional asset classes, the sustainable investments, the funding gap that the fund addresses, "which is even increasing today with pricing rising". Furthermore, such investments create a positive impact as an investor in their four impact themes (food security, poverty reduction, woman empowerment, and environmental quality).
With regards to restrictions related to the pandemic, INOKS says in an earlier newsletter that no country has been halting essential goods movements. Furthermore, some European countries have been allowing seasonal workers from abroad to travel to ensure the spring planting and harvesting of freshly produced goods.
"We expect this to stay the same (as) food supply ensures the population survival. Even in the commodities producing emerging markets, the exports are the lifeblood of these countries to obtain much-needed income. Countries like the Ivory Coast are the world's largest producer of cocoa or coffee.
"The lockdown at home changed entirely our habits but nevertheless, we still need to consume food, noticeably consumption of coffee, cocoa, sugar, fruit juice, bread, pasta and other non-fresh basics."
Two recent investment examples include one in concentrated fruit juice firms in Eastern EU, where the transaction involves the purchase of apples, storage in vetted warehouse locations, processing and storage of the concentrate at vetted locations and export to OECD domiciled buyers; and one in peanuts production in South Africa, where the transaction involves the supply of farming input (such as fertilizers, seeds, fuel), payment of labour force and farming activities, later on, storage, processing, transportation and export of the harvested financed crops.
Upcoming webinar:
Fixed Income Alternatives Strategies: 5 strategies on one panel
Wednesday, Sept. 9th at 10 am EST
Details and (free) registration: www.opalesque.com/webinar/
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