Hedge funds in the US, UK and Singapore have signed agreements with Aztec Exchange to purchase invoices from suppliers in emerging markets and credit-constrained developed markets.
Through the agreement, these funds will buy the receivables from a variety of regions with short-term maturities (45-90 days), with average annualised yields around 20 per cent.
“Trade receivables are a unique investment proposition for fund managers as they can offer superior yields over other short-maturity assets. More importantly, our platform facilitates a ‘true sale’ of the invoices, which means the credit exposure is not with the supplier in the emerging market but with their debtor, often a multinational corporation of verifiable credit standing,” says Aztec Exchange CEO Edwin Hagan-Emmin. “We are in talks with additional investors as we push ahead with large trade receivable programs, and expect our client base to continue to grow in the coming months.”
For fund managers, the Aztec platform is unique in providing direct access to the returns offered by trade receivables globally. Traditionally, major banks have been the primary originators of trade receivables, which are typically retained on balance sheet due to their attractive profile.
The deals cap off a successful first six months of operations for Aztec, which has registered over 200 suppliers to sell invoices on its platform since going live in June 2013 and has capacity for USD30bn of trade receivables annually. In addition, Aztec is engaged with a handful of global corporations to help their suppliers access working capital as part of supply-chain financing programs. Aztec is also in early-stage conversations with banks about developing a trade receivable funding and referral program, where these institutions can route clients’ invoices to the Aztec platform.
Hagan-Emmin says: “Major corporations are embracing Aztec as a supplement to traditional bank capital in supply-chain finance. With banks tightening their lending to small businesses, especially in emerging and credit-constrained markets, corporates are increasingly looking to innovative, alternative solutions to support their suppliers.”
Aztec’s technology is deployable globally and available in over 20 languages, with support provided by local teams on the ground. To accommodate further growth, Aztec plans to open offices in the US and Asia within the next six months.