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Business & Finance

Santander's asset management arm to launch trade finance fund

  • The fund - aimed at institutional and accredited investors - will primarily buy assets created by the banking group's trade finance business in transactions with its large corporate clients, the sources said.
  • The recent collapse of British supply chain finance company Greensill, however, has raised investor concerns on some of the risks involved and in some cases, the sector's lack of transparency.
08 Apr 2021

LONDON: Spanish bank Santander SA's asset management arm is close to launching a new fund that will allow clients to invest in trade finance receivables, according to three sources familiar with the plans.

The fund - aimed at institutional and accredited investors - will primarily buy assets created by the banking group's trade finance business in transactions with its large corporate clients, the sources said.

The move marks Santander Asset Management's first foray into trade finance funds.

Trade and supply chain finance, where lenders pay a company's suppliers on the company's behalf in exchange for a fee and repayment at a later date, has boomed over the past year amid the coronavirus pandemic. Investment funds have also been increasingly providing capital to finance these transactions, as they hunt for yield in a record low interest rate environment.

The recent collapse of British supply chain finance company Greensill, however, has raised investor concerns on some of the risks involved and in some cases, the sector's lack of transparency.

Credit Suisse Group last month shut $10 billion worth of supply chain funds that invested in bonds issued by Greensill after the British firm lost credit insurance coverage for its debt packaging business. The collapse has left investors in the funds facing potential losses, with the Swiss bank yet to recoup more than $5 billion of investments as of March 29.

Santander's new fund is structured to include a number of oversight practices to manage risk for investors, the sources said. Among these, portfolio managers will assess what assets may be included in the fund after reviewing their underlying documentation to ensure they match the fund's mandate, according to the sources. An independent investment committee comprised of well-known industry practitioners has been appointed and is also reviewing each asset to be included in the fund, the sources said.

The bank will be one of the fund's investors, the sources said.