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Alternative Market Briefing

New trade finance fund aims to help European SMEs

Tuesday, October 12, 2021

Andreas Schweitzer
B. G., Opalesque Geneva:

Trade finance serves as the lifeblood of day-to-day international trade by providing the fluidity and security needed to allow goods and services movement. Trade finance is known to be particularly vulnerable in times of economic crisis. During the COVID-19 crisis, the OECD has observed that exporters have been facing difficulties accessing short-term financing in the private market. Last year's trends suggested that even though commercial lenders may have adequate liquidity to provide funding to exporters, their risk appetite may have diminished, resulting in the limited availability of trade finance. That's even though trade finance is considered one of the safest asset classes to invest in even during turbulence. Corporate lending, for example, is statistically riskier than trade finance lending. So now is the time for bold lenders to come into the trade finance market and bridge that gap.

One of them is Artis Trade Invest, the new trade finance fund managed by Arjan Capital, that aims to enable trade by shortening exporters' working capital cycle and extending it for importers. This is done typically by entering a sale and purchase agreement of a highly liquid and non-perishable good or by financing open accounts with high-quality debtors mainly based in Europe.

Launched by a trade finance veteran

Artis Trade Invest is a first-time trade finance business based on the proprietary trades of Andreas Schweitzer, Arjan's managing director. Schweitzer has been in trade finance since the mid-80s when he worked for the Jacobs Suchard Group and its trade finance banks across Latin America. Since 2009 Andreas Schweitzer has assisted mid and large-cap companies with their trades with Central Asia and now, as the trade finance shortage is also felt in Switzerland and the EU, he mainly concentrates on European trade.

Andreas Schweitzer is the author of the book "Trade Works", which will be published by Simon&Schuster by the end of 2021, and which brings the trade investment asset class closer to the general public. He will present in the Small Managers BIG ALPHA Episode 4 webinar on October 21st.

The investment models are (a) Liechtenstein SICAV AIF in the process of incorporation (b) a listed bond and (c) managed accounts. Artis will specialise in helping European small and medium-sized businesses (SMEs) trade with global markets. The fund's target size is €250m, and its expected returns are about 6% p.a. net of fees.

Artis will focus predominantly on enterprises with clear developmental potential and established relationships with national and cross-border buyers that display a proven track record of delivering products that meet the highest quality standards in their respective markets. Yet, those enterprises are underserved by private banks. Risk is managed with credit insurance, recourse, and other guarantees.

The trade finance gap

"Some 80 to 90 percent of world trade relies on trade finance," has said the WTO (World Trade Organization).

According to Arjan Capital, the term "trade finance gap" wasn't in the headlines or prominent in the news until the world witnessed the financial crisis of 2008. The aftermath of the 2008 crisis brought an environment of new trade-related sanctions, regulations, strict lending policies, the rise of fintech and much more. As a result, financial institutions and banks started to reduce the lending options available to SMEs, thrusting the trade finance gap to centre stage.

Ever since the term 'trade finance gap' was first coined, the trade finance rejection rate for SMEs has remained above 50%, and it is only rising with time. The ICC (International Chamber of Commerce) estimates that up to $1.5 trillion of trade finance applications are rejected each year globally. The main culprit is the tightening of regulations. With it, the related cost of the transaction now suffocates the trade.

COVID-19 worsened the already present drivers of the trade finance gap. The lack of trade financing available continues to hamper the recovery of the economies around the world. Although organisations worldwide have started taking measures to slow down the widening of the trade gap, according to the ICC, a possible $5 trillion is needed to enable rapid recovery from COVID-19 and help small businesses survive.

This 'trade finance gap' presents an excellent opportunity for investors to help bridge the gap, make an impact and capitalise on an underserved market whilst generating stable ROI (return on investment).

Arjan Capital Ltd is a London-based Central Asia and Middle East-focused M&A, corporate finance and trade advisory boutique, authorised and regulated by the UK FCA since August 2015.

Next webinar:

Small Managers - BIG ALPHA Episode 4
When: Thursday, October 21st at 10:30 am ET
Free registration:

With larger quantities of capital chasing the same Alpha strategies and continuing to erode Alpha, savvy investors are turning to smaller and/or emerging managers as they look for alternative sources of return.

We are proud to present you Episode 4 of this groundbreaking webinar series with the following carefully screened panel of investment managers:
- Heeten Dosch, Doshi Capital Management
- Craig Reeves, Prestige Funds
- Randy Baron, Pinnacle Associates
- Andreas Schweitzer, Arjan Capital

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