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By Opalesque Geneva:

In 2024, about $9.7tln in global trade - over 80% of all international trade transactions - relied on trade finance. A recent report headed by the International Chamber of Commerce confirms that trade, supply chain and export finance continue to exhibit low risk, with default rates remaining low across all regions and asset classes overall. As global trade faces ongoing geopolitical and economic pressures, these financial products continue to serve as vital tools for mitigating risk and maintaining liquidity, supporting the stability of trade flows.

Here is a trade finance* fund manager who has managed to steer away from defaults and has had no losses since the inception of its flagship fund in 2018, which follows a pioneering strategy.

Singapore-based TradeFlow Capital Management manages the USD Trade Flow Fund. The fund follows a non-credit lending approach, focuses on SMEs, is Shariah-compliant, has integrated ESG principles, embraces the latest digitalisation technologies, and makes full use of insurance.

Dr Tom James, co-founder and a 35-year veteran in commodity and energy markets, financial services and fintech, talked to Opalesque before the Small Managers Big Alpha Episode 16 interactive webinar on April 3rd (details below).

Opalesque: What differentiates the USD Trade Flow Fund from its peers?

Dr Tom James: The USD Trade Flow Fund is unique in the market due to its non-credit lending approach: instead of lending capital, we take legal title to the underlying commodities during the trade cycle. This reduces credit risk and transforms what is typically a lending structure into an asset-backed over collateralised transaction model.

Key differentiators include:
• Focus on SME trade flows: We address a segment of the market that is underserved by traditional banks.
• Shariah compliance: Our investment model follows a Murabaha-style structure and has been certified as Shariah-compliant.
• Integrated ESG strategy: All cargoes under our management are shipped carbon-neutrally, and we are actively involved in agricultural green social sukuk initiatives.
• Full digitalisation: We operate on a proprietary digital platform that ensures transparency, speed, and compliance, leveraging the latest in fintech and legal-tech innovation.
• Robust insurance layer: Every transaction is supported by multiple levels of insurance, including cargo, and political risk coverage.

In addition to the above, we are exploring the integration of AI-based risk analytics, expanding our partnerships with digital trade ecosystems, and continuing our work on tokenised trade finance solutions to increase access and liquidity for a broader investor base.

Opalesque: Are you preparing for future disturbances in global trade flows?

Dr Tom James: Yes, absolutely. Our investment model is inherently resilient due to its short trade cycle durations, diversified geographic exposure, and non-reliance on credit. Our strategy and investment model were proven during Covid in 2020-2021, which was an unprecedented global event which impacted supply chains.

That said, we continuously monitor macroeconomic risks, supply chain fragilities, and geopolitical developments.

We prepare for possible disturbances by maintaining a globally distributed network of counterparties, allowing us to reroute or rebalance trade flows if necessary. We also employ real-time monitoring of vessel movements, sanctions risks, and logistics constraints via our digital platform. Furthermore, we maintain relationships with warehouse and port operators all over the world.

Opalesque: How do you see your role in trade finance?

Dr Tom James: Trade finance is evolving rapidly. We see ourselves not only as investors but also as enablers of real-world economic activity, bridging capital with physical trade in a secure, transparent, and sustainable way.

In a world of increasing volatility, our mission remains clear: to de-risk trade, support global SMEs, and provide our investors with stable, uncorrelated returns backed by tangible flows of goods.

Opalesque: Can you tell us about your new fund?

Dr Tom James: The TradeFlow Ultimate Protection Fund was created out of the growing interest in capital protection strategies during volatile times.

The Ultimate Protection Fund is a natural evolution of our original strategy, designed to offer investors enhanced capital protection. The idea of this product was to allow existing investors to over-allocate beyond their normal concentration limits and also to provide enhanced capital protection by integrating additional insurance and capital protection mechanisms for risk-sensitive investors e.g. endowments and foundations.

The rationale behind launching this fund was to provide institutional and private investors with a product that offers exposure to real-economy trade flows while maximizing capital preservation.

* Trade finance represents the financial instruments and products that are used by companies to facilitate international trade and commerce. Its function is to introduce a third party to transactions to remove the payment risk and the supply risk.

Free registration here: www.opalesque.com/webinar/